The First Step in Activity-Based Costing Is to

question 45

Multiple Choice

The first step in activity-based costing is to

• A)assign manufacturing overhead costs for each activity cost pool to products.
• B)calculate the activity-based overhead rate per cost driver.
• C)identify and classify the major activities involved in the manufacture of specific products.
• D)identify the cost driver that has a strong correlation to the activity cost pool.

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Definitions:

Vertical Intercept

The point where a graphed line crosses the vertical axis, often used in mathematical functions to determine a starting point.

Required Rate

The minimum return an investor expects to achieve on an investment, considering the risk level associated with the investment.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, used in statistics to quantify the variability or spread of a data set.

SML

The Security Market Line (SML) is a graphical representation of the Capital Asset Pricing Model (CAPM), showing the relationship between the expected return of investments and their risk as measured by beta.