When using an ABC cost allocation system, all of the following steps are performed at the beginning of a company's year except : A. Allocate the costs from each activity using the cost allocation rate. B. Select an allocation base for each activity, and estimate the amount used of each allocation base. C. Calculate an activity cost allocation rate for each activity. D. Identify the primary activities and estimate a total overhead cost for each.

Question

Business

Adelaide Mcintyre

12 July, 10:55

When using an ABC cost allocation system, all of the following steps are performed at the beginning of a company's year except : A. Allocate the costs from each activity using the cost allocation rate. B. Select an allocation base for each activity, and estimate the amount used of each allocation base. C. Calculate an activity cost allocation rate for each activity. D. Identify the primary activities and estimate a total overhead cost for each.

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Antwan Baird · Answer 1

C. Calculate an activity cost allocation rate for each activity.

Explanation:

The final stage of ABC designing requires applying the cost driver rates to products. Therefore the cost driver must be measurable in a way that it enables it to be identified with individual products. Thus if set up hours are selected as a cost driver there must be mechanism for measuring the set up hours consumed by each product. These cannot be measured at the beginning of the company's year.