An activity-based costing system is developed in four steps:
A.Compute the predetermined overhead allocation rate for each activity.
B.Identify activities and estimate their total indirect costs.
C.Identify the allocation base for each activity and estimate the total quantity of each allocation base.
D.Allocate indirect costs to the cost object.
Which of the following is the correct order for performing these steps?

Question

Quizplus · Accepted Answer

The correct order is to first identify activities and estimate their total indirect costs (b), then identify the allocation base for each activity and estimate the total quantity of each allocation base (c), compute the predetermined overhead allocation rate for each activity (a), and finally allocate indirect costs to the cost object (d).

An Activity-Based Costing System Is Developed in Four Steps