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

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This is because the whole purpose of implementing an ABC system is to allocate costs to cost objects based on the activities that drive those costs. The drivers used in an ABC system are the specific activities that cause changes in costs, such as machine setups, orders processed, or customer invoices generated. By linking costs to these drivers, companies can more accurately assign costs to the products, services, or customers that actually cause those costs to be incurred.

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