Question

An improvement to the use of a predetermined overhead rate for assigning overhead costs to manufactured products is:

Group of answer choices

activity-based costing

process costing

absorption costing

job order costing

Answer 1

Answer is: Activity-based costing

An improvement to the use of a predetermined overhead rate for assigning overhead costs to manufactured products is Activity-based costing.

Explanation: Activity Based Costing is a technique which involves identification of cost with each cost driving activity and making it as the basis for assignment of costs over different products more accurately that consume them rather than traditional methods where either lanour or machine hours are considered as absorption basis over cost centres.

Activity based costing is a refinement of calculation of predetermined overhead rate since the same is calculated on the basis of activities and are allocated to products on the basis of activity consumption which gives more accurate and reliable cost of the products.