What are the steps in Activity-Based Costing?

Step 1: Identify the products that are the chosen cost objects. Step 2: Identify the direct costs of the products Step 2: Identify the direct costs of the products. Step 3: Select the activities and cost-allocation bases to use for allocating indirect costs to the products for allocating indirect costs to the products.

What is the first stage in Activity-Based Costing?

The first step in Activity-Based Costing is to divide the expenses of certain overhead activities to a per-event cost. For example, say that the overall cost of resetting a machine for production during the year was $1 million.

What is the first stage allocation?

A first stage allocation is the process used to assign overhead costs to activities. This allocation is employed in an activity-based costing system, and is the first step in the eventual allocation of overhead costs to cost objects.

What are the steps for implementing ABC?

The five steps are as follows:

1. Identify costly activities required to complete products.
2. Assign overhead costs to the activities identified in step 1.
3. Identify the cost driver for each activity.
4. Calculate a predetermined overhead rate for each activity.
5. Allocate overhead costs to products.

What are the two stages of allocation?

A two-stage system first allocates costs to departments or activities and then allocates costs from the departments or activities to the products or services. LO 9-3 Compare and contrast plantwide and department allocation methods. A single-stage cost allocation system uses a single, plantwide, rate to allocate costs.

What is the two step allocation process?

In the traditional two stage approach, service department costs are allocated to the producing departments in the first stage and then allocated (applied or traced) to the products produced along with other producing department overhead in the second stage using departmental overhead rates.