To implement ABC systems,managers must identify a cost driver for each activity.

Question

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In order to implement ABC (Activity-Based Costing) systems, managers must identify a cost driver for each activity as this helps to allocate costs to each activity based on its relative usage of resources. Cost drivers are factors that influence the cost of an activity, such as the number of setups, machine hours, or units produced. By identifying cost drivers, managers can accurately assign costs to products, services or customers based on the actual consumption of resources.

To Implement ABC Systems,managers Must Identify a Cost Driver for Each