Respuesta :
Answer:
2) Overhead costs are traced to activities, then costs are traced to products.
Explanation:
Under activity based costing, all the costs which is not directly related to the product, or cannot be directly allocated based on number of units, are identified and then allocated based on the activity ratio.
As for example the factory rent is for entire factory producing 3 types of product. It shall be allocated among the three products on the basis of area used by them, rather than common overhead rate based on machine hour, as rent is directly related to area.
Therefore for each overhead costs activities are identified, and then based on such activities cost is allocated.
The activity based costing system uses the Overhead costs that are traced to activities, then costs are traced to products.
What is an activity based costing system?
Activity-based costing, denoted as (ABC). It is a method of charging overhead and indirect costs.
Like salaries and utilities for producing the products and services.
Under this method, all those costs which are not directly associate to the product, or cannot be straightly apportioned based on the number of units, are determined and then assigned on the basis of activity ratio.
Example:
The factory rent is for the entire factory, which produces three different sorts of products. It will be divided among the three products based on the area they utilize, rather than a common overhead charge based on machine hour, because rent is proportional to area.
Therefore, the activities are identified for each overhead costs, and then based on such activities cost is allocated. Option 2 is correct.
To learn more about the costing system, refer to:https://brainly.com/question/24516871
