How to calculate activity rates?
Understand the Problem
The question is asking for a method or formula to determine activity rates, which typically refers to calculating how often certain activities occur in a given context, often used in fields like accounting or operations management.
Answer
Activity Rate = Total Activity Cost / Total Activity Driver Units
The final answer is to determine the activity costs, estimate total activity drivers, and use the formula Activity Rate = Total Activity Cost / Total Activity Driver Units.
Answer for screen readers
The final answer is to determine the activity costs, estimate total activity drivers, and use the formula Activity Rate = Total Activity Cost / Total Activity Driver Units.
More Information
Activity rates are part of Activity-Based Costing (ABC) which helps businesses allocate overhead costs more accurately.
Tips
A common mistake is incorrectly estimating the total units of the activity driver, which can lead to inaccurate activity rates.
Sources
- Activity-Based Costing - Investopedia - investopedia.com
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