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COLLECTING COST AND OPERATIONAL DATA IS THE FIRST STEP IN THE DESIGN OF AN ACTIVITY- BASED...

COLLECTING COST AND OPERATIONAL DATA IS THE FIRST STEP IN THE DESIGN OF AN ACTIVITY- BASED COSTING SYSTEM. TRUE OR FALSE

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Answer #1

The statement is false.

Activity based costing system is a costing method used to identify activities in the organisation and assigning the cost of each activity to all products and services according to the actual consumption of each product. The steps involved in activity based costing system are

a) The first step is to estimate the resources of the firm and identify the costs of the activities required to complete the product.

b) overhead costs are assigned to the activities identified in above step

c) cost driver of each activity should be identified

d)calculation of overhead rate which is predetermined for each activity

e) Allocation of overhead costs to each product

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