Question

The first step in activity-based costing is to

a) Identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools.
b) Compute the activity-based overhead rate per cost driver.
c) Assign overhead costs to products, using overhead rates determined for each cost pool.
d) Identify the cost driver that has a strong correlation to the activity cost pool.

Answer 1

The first step in activity-based costing includes identifying and classifying activities, computing the activity-based overhead rate per cost driver, and assigning overhead costs to products.

Step-by-step explanation:

The first step in activity-based costing is to identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools.

Once the activities are identified and classified, the next step is to compute the activity-based overhead rate per cost driver. This involves determining the cost driver that has a strong correlation to the activity cost pool.

Finally, the last step is to assign overhead costs to products, using the overhead rates determined for each cost pool.