The first step in developing an activity-based costing system is to identify the activities that will be used to allocate the manufacturing overhead costs.

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To develop an activity-based costing system, the first step is to identify the activities that drive the manufacturing overhead costs. This is because ABC systems allocate indirect costs based on the activities that cause them, rather than a predetermined overhead rate based on direct labor or machine hours.

The First Step in Developing an Activity-Based Costing System Is