An activity-based costing system is developed in four steps. a. Compute the allocation rate for each activity
B. Identify activities and estimate their total costs
C. Identify the cost driver for each activity and then estimate the quantity of each driver's allocation base
D. Allocate the indirect costs to the cost object
Which of the following is the correct order of performing these steps?
A)a, b, c, d
B)c, a, b, d
C)b, c, a, d
D)b, a, c, d

Question

Quizplus · Accepted Answer

Step 1 is identifying activities and estimating their total costs, step 2 is identifying the cost driver for each activity and estimating the quantity of each driver’s allocation base, step 3 is computing the allocation rate for each activity, and step 4 is allocating the indirect costs to the cost object. Therefore, the correct order is b, c, a, d.

An Activity-Based Costing System Is Developed in Four Steps