Designing an activity-based cost system includes:
A)classifying as many costs as indirect costs as is feasible.
B)creating as many cost pools as possible.
C)identifying the activities performed by the plant's resources.
D)seeking a broader focus rather than detail.

Question

Quizplus · Accepted Answer

Designing an activity-based cost system involves identifying the activities performed by the plant's resources. This is because activity-based costing involves assigning costs to specific activities, and then allocating those costs to products or services based on the resources used by those products or services. Classifying as many costs as indirect costs (A) is not necessarily feasible or advisable, as some costs may be directly related to specific products or services. Creating as many cost pools as possible (B) is also not necessarily advisable, as this can lead to a complex and unwieldy cost system that may not provide meaningful information. Seeking a broader focus rather than detail (D) is also not advisable, as the whole point of activity-based costing is to provide more detailed and accurate information about the costs of specific activities and the resources used by products or services.

Designing an Activity-Based Cost System Includes