Question

What is the proper order of tasks in an ABC system?

A. identify the cost drivers, assign the costs to the products, calculate the overhead application rate for each cost pool, identify the cost pools

B. assign the costs to the products, identify the cost drivers, calculate the overhead application rate for each cost pool, identify the cost pools

C. identify the cost drivers, identify the cost pools, calculate the overhead application rate for each cost pool, assign the costs to the products

D. identify the cost pools, identify the cost drivers, calculate the overhead application rate for each cost pool, assign the costs to the products

Answer 1

The correct answer is D. The correct order for an ABC system involves identifying cost pools, determining cost drivers, calculating overhead application rates, and then assigning costs to products.

Step-by-step explanation:

The proper order of tasks in an Activity-Based Costing (ABC) system is to first identify the cost pools, which are groups of expenses that are caused by the same factor and therefore can be assigned to a single cost driver. Next, identify the cost drivers, which are the activities or factors that cause a cost pool's costs to fluctuate.

After identifying the cost drivers, you calculate the overhead application rate for each cost pool to determine how much overhead to assign to each product based on the cost drivers. Finally, you assign the costs to the products based on the calculated overhead rates.

The correct answer to the order of tasks in an ABC system is therefore identify the cost pools, identify the cost drivers, calculate the overhead application rate for each cost pool, assign the costs to the products.