In Stage 2 of ABC allocation:
A) cost drivers are determined and costs are traced to each activity.
B) activities are identified.
C) predetermined overhead rates are calculated.
D) equivalent units are computed.

Question

Quizplus · Accepted Answer

In Stage 2 of ABC allocation, cost drivers are determined and costs are traced to each activity. This helps to understand the cost behavior and resource consumption for each activity, which in turn helps to assign overhead costs more accurately to the products or services that use these resources. Activities are identified in Stage 1, predetermined overhead rates are calculated in Stage 3, and equivalent units are computed in Stage 4.

In Stage 2 of ABC Allocation