Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 25

What is the second-stage procedure in assigning costs to products when using an activity-based costing system?

Step 1 of 3

Activity Based costing system:

Activity based costing system allocates overhead expenses to the products based on cost objects. This approach is based on concept that every firm’s products and services are a result of series of activities and resources are required to perform these activities. Further, these resources require cost to perform the activities.

Hence, cost should be allocated based on activities for which cost is incurred.