The following four steps are necessary in order to use an activity-based costing system:
1) Compute the allocation rate for each activity.
2) Identify activities and estimate their total costs.
3) Identify the cost driver for each activity and then estimate the quantity of each driver's allocation base.
4) Allocate the indirect costs to the cost object.
In what order are these steps performed?
A) 1,2,3,4
B) 3,1,2,4
C) 2,3,1,4
D) 2,1,3,4

Question

Quizplus · Accepted Answer

The correct sequence for implementing an activity-based costing system is: identifying the activities and estimating their total costs, identifying the cost driver for each activity and estimating the quantity of each driver's allocation base, computing the allocation rate for each activity, and finally allocating the indirect costs to the cost object.

The Following Four Steps Are Necessary in Order to Use