Question

Activity-based costing systems: Eliminate multiple-stage cost allocation. Accumulate overhead costs by departments. Have separate overhead rates for each activity. Can be used in manufacturing firms only. Are less complex and therefore less costly than volume-based systems.

Answer 1

Eliminate multiple-stage cost allocation. Accumulate overhead costs by departments and Have separate overhead rates for each activity.

Step-by-step explanation:

Activity-based costing systems are used to allocate indirect costs to Products. This is because indirect costs can not be traced directly to the product being produced or cost center. So, Activity-based costing systems can be used in any industry. The main point in Activity-based costing systems is how to allocate general cost or general expenses to each cost center or product.

Thus, identification of activity costs centers and activity costs drivers to allocate the overheads is costly and takes a lot of time. However these systems eliminate multiple-stage cost allocation. Accumulate overhead costs by departments and have separate overhead rates for each activity.