Activity-based costing uses a number of activity cost pools,each of which is allocated to products on the basis of direct labour hours.

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Activity-based costing involves allocating costs to products based on the activities involved in producing them, rather than just direct labour hours. Cost pools may be defined based on a variety of activities, such as set-up time, materials handling, or quality control, and costs are then allocated based on how much of each activity is used in producing a particular product.

Activity-Based Costing Uses a Number of Activity Cost Pools,each of Which