Question

Which formula best represents the first step used to allocate an indirect cost to a cost object?

Multiple Choice
a. Total cost to be allocated divided by cost driver
b. Allocation rate divided by total cost to be allocated
c. Cost driver divided by total cost to be allocated
d. Cost driver divided by allocation rate

Answer 1

A

Step-by-step explanation

The a) rate gives the portion of the cost that will be allocated for each unit of the cost driver. The cost driver can be money, units, energy quantity, etc.