The activity rates in activity-based costing are computed by dividing the direct labor-hours for an activity cost pool by the measure of activity for the activity cost pool.

Activity Rates

The costs or rates associated with specific activities used in activity-based costing to allocate expenses to products or services.

Activity Cost Pool

A way to aggregate all indirect costs associated with a particular activity, aiding in more accurate cost allocation.

Direct Labor-Hours

The total hours worked by employees who are directly involved in the manufacturing process or providing service to customers.