Question

In a two-stage activity-based costing model, stage one involves Select one: A. assigning direct costs to cost objects. B. assigning indirect resource costs to activity pools. C. assigning activity costs to cost objects.

Answer 1

Answer:

The correct answer is letter "B": assigning indirect resource costs to activity pools.

Explanation:

Activity-based costing or ABC is a managerial accounting method that assigns indirect costs to the products which incur the bulk of those costs. In the manufacturing sector, ABC is mainly used to help measure the true cost of output per unit.

The two-step ABC approach involves assigning indirect costs of support departments -e.g., maintenance, quality control- to pools of production departments in the first step. In the second step, activity costs are combined with the indirect costs and overhead rates are added.