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What is an​ activity-based approach to designing a costing​ system?

A. An​ activity-based approach traces direct costs to a cost object by using the actual​ direct-cost rates times the actual quantities of the​ direct-cost inputs. Indirect costs are allocated based on the actual​ indirect-cost rates times the actual quantities of the ​cost-allocation bases.
B. An​ activity-based approach describes a particular costing approach that uses broad averages for assigning the cost of resources uniformly to cost objects.
C. An​ activity-based approach refines a costing system by focusing on individual activities as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products or services.
D. An​ activity-based approach means making changes that result in cost numbers better measuring the way different cost​ objects, such as​ products, use different amounts of resources of the company. These changes require the assignment of costs to direct and indirect cost pools and the use of a single​ indirect-cost rate.

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Answer: The correct answer is "C. An​ activity-based approach refines a costing system by focusing on individual activities as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products or services.".

Explanation: The ABC costing model is a model that is based on the grouping into cost centers that make up a sequence of value of the products and services of the company's productive activity. It focuses its efforts on managerial reasoning in an adequate way the activities that cause costs and that are related through its consumption with the cost of the products. The most important thing is to know the generation of costs to obtain the greatest possible benefit from them, minimizing all the factors that do not add value.

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