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

Question

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

Quizplus · Accepted Answer

The correct order for developing an activity-based costing system is: Identify activities and estimate their total indirect costs (b), identify the allocation base for each activity and estimate the total quantity of each allocation base (c), compute the predetermined overhead allocation rate for each activity (a), and finally allocate indirect costs to the cost object (d).

An Activity-Based Costing System Is Developed in Four Steps