Ideally, activity costs in an ABC system are allocated to cost objects using a driver that explains changes in activity costs.

Question

Quizplus · Accepted Answer

This is the core principle of Activity-Based Costing (ABC) system where activity costs are allocated to cost objects using a driver that shows the relationship between the cost driver and the cost of the activity. The driver should explain changes in activity costs, making it easier to determine the true cost of a product or service.

Ideally, Activity Costs in an ABC System Are Allocated to Cost