When designing an activity$-$based costing system, related activities are frequently combined to reduce the amount of detail and record$-$keeping cost.

Activity$-$based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor$-$hours.

Activity$-$based costing involves a two$-$stage allocation process in which overhead costs are first assigned to activity cost pools and then allocated to products using activity measures.

The challenge in designing an activity$-$based costing system is to identify all of the activities that explain the variation in overhead costs.

Multiple Choice

Statements $1$ and $3$ are true.

Statements $2$ and $3$ are true.

Statements $1,2,$ and $3$ are true.