WHEN USING A TWO STAGE ACTIVITY- BASED COSTING SYSTEM, WHICH OF THE FOLLOWING IS NOT A...

WHEN USING A TWO STAGE ACTIVITY- BASED COSTING SYSTEM, WHICH OF THE FOLLOWING IS NOT A LEGITIMATE STEP?

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Activity- based Costing System allocates the overhead to multiple cost pools and assigns the activity cost pools to products or services by means of cost drivers. The complex manufacturing processes may require multiple allocation bases and this approach is called Sctivity-based Costing System.

Activity-based Costing System allocates overhead costs in two stages:

Stage 1: Overhead costs are allocated to activity cost pools.

Stage 2: The overhead costs allocated to the cost pools is assigned to products using cost.

Basically, Activity-based Costing System involves the following steps:

1. Identify and classify the major activities and allocate manufacturing overhead costs to the appropriate cost pools.

2. Identify the cost driver that has a strong correlation to the costs in the Cost pool.

3. Compute the overhead rate for each pool.

4. Assign the overhead costs for each costs to products using the overhead rates.

ekkarill92 answered 1 year ago

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