In activity-based costing, the first step in assigning costs is to
A) analyze all nonvalue-adding activities to determine if they are necessary support areas.
B) accumulate costs for each activity.
C) identify and classify each activity.
D) separate nonvalue-adding activities from value-adding activities.

Question

Quizplus · Accepted Answer

The first step in activity-based costing is to identify and classify each activity, meaning to identify all the specific tasks and functions that take place within the organization and then grouping them into categories or "activities". This allows for a better understanding of where costs are being incurred and how they can be allocated more accurately. Accumulating costs for each activity and analyzing them comes in later steps. Separating nonvalue-adding activities from value-adding activities may also be done later in the process once the activities have been identified and classified.

In Activity-Based Costing, the First Step in Assigning Costs Is