Question

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 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. C. An​ activity-based approach describes a particular costing approach that uses broad averages for assigning the cost of resources uniformly to cost objects. 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.

Answer 1

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 cost objects such as products or services.

Step-by-step explanation:

This is a costing system that works by allocating costs to different cost items based on the activity level of these items. This as opposed to traditional costing methods, assigns indirect or overhead cost to products or services less arbitrarily through identifying products or services with most activity or less activity and allocating costs to them based on this measurement.