An Activity-Based Costing System Is Developed in Four Steps

question 30

Multiple Choice

An activity-based costing system is developed in four steps:
A.Compute the predetermined overhead allocation rate for each activity.
B.Identify activities and estimate their total indirect costs.
C.Identify the allocation base for each activity and estimate the total quantity of each allocation base.
D.Allocate indirect costs to the cost object.
Which of the following is the correct order for performing these steps?

• A)a,b,c,d
• B)c,a,b,d
• C)b,c,a,d
• D)b,a,c,d

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Definitions:

Goodwill

An intangible asset that arises when a business is acquired for more than its fair market value, reflecting factors like reputation, brand, and customer loyalty.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating the liquidity and operational efficiency of the business.

Current Assets

Short-term assets that are expected to be converted into cash, sold, or consumed within one year or within the business's operating cycle, whichever is longer.

Current Liabilities

Obligations a company needs to pay off within one year or within its operating cycle, whichever is longer.