The cost hierarchy helps identify activities and assign costs to activities in an activity based costing system.

Question

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The cost hierarchy in activity-based costing (ABC) categorizes activities into different levels (such as unit-level, batch-level, product-level, and facility-level activities) for the purpose of assigning costs more accurately to products or services based on the activities that generate those costs.

The Cost Hierarchy Helps Identify Activities and Assign Costs to Activities