Following is a list of steps that must be performed in setting up an ABC system:
_____ Identify and sum the costs into activity-based cost pools.
_____ Choose a cost driver for each activity.
_____ For each ABC cost pool, allocate overhead costs to the product or service.
_____ Identify the relevant cost object.
_____ Identify the activities necessary for production or service delivery.
_____ For each ABC cost pool, calculate a cost allocation rate.

A. Number the steps from 1 through 6 to indicate the sequence in which they are performed.
B. For each step, explain whether uncertainties are likely.
C. Pick the step that you think would require the greatest use of judgment, that is, would include the most uncertainties. Explain your choice.

  • CreatedJanuary 26, 2015
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