14 Activity-based costing (ABC) is a two-stage cost allocation system that (1) allocates costs to activities and (2) then to products based on their use of the activities. TRUE FALSE Using direct labor costs to allocate overhead costs in an activity-based costing (ABC) system will 15 encourage management to reduce labor costs. FALSE TRUE The step method allocates some, but not all, service department costs to other service departments. 16 FALSE TRUE