The first step in developing an ABC system is
A)calculate an activity cost allocation rate for each activity.
B)allocate the costs to the cost object using the activity cost allocation rates.
C)select an allocation base for each activity.
D)identify the primary activities and estimate a total cost pool for each.

Question

Quizplus · Accepted Answer

The first step in developing an ABC system is to identify the primary activities and estimate a total cost pool for each. This step involves analyzing the activities that consume resources and incur costs, which is necessary for accurate allocation of costs to the cost object using the activity cost allocation rates. Once the cost pools have been estimated, allocation bases can be selected and activity cost allocation rates can be calculated. Therefore, option D is the best choice as it is the initial step in developing an ABC system.

The First Step in Developing an ABC System Is