What should be done in Stage 1 in an activity-based costing (ABC) system?
A) Total manufacturing costs are calculated.
B) Raw materials are purchased.
C) Cost drivers for activities are chosen.
D) Activities are identified.

Question

Quizplus · Accepted Answer

In Stage 1 of an activity-based costing (ABC) system, the focus is on identifying and defining the organization's activities. This involves identifying the specific tasks or functions that are necessary to produce a product or service. Only option D, "Activities are identified," accurately describes this stage of ABC. Option A, "Total manufacturing costs are calculated," is not the correct choice, as this would likely occur in later stages. Option B, "Raw materials are purchased," pertains more to the procurement process and is also not the correct choice. Option C, "Cost drivers for activities are chosen," is not the best choice either, as determining cost drivers is typically a part of Stage 2 of ABC.

What Should Be Done in Stage 1 in an Activity-Based