The process for allocating support activity costs with activity-based costing is similar to that used with a single plantwide rate.

Question

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Activity-based costing (ABC) allocates support activity costs based on multiple cost drivers that reflect the actual consumption of resources, whereas a single plantwide rate typically allocates costs based on a single basis such as direct labor hours or machine hours, not reflecting the true consumption of support activities.

The Process for Allocating Support Activity Costs with Activity-Based Costing