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What is the primary focus of activity-based costing (ABC)?

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Question: What is the primary focus of activity-based costing (ABC)?

Options:

  1. Allocating costs based on volume
  2. Identifying activities that drive costs
  3. Reducing fixed costs
  4. Simplifying cost allocation

Correct Answer: Identifying activities that drive costs

Solution: 

Activity-based costing focuses on identifying activities that drive costs and allocating costs based on those activities.

What is the primary focus of activity-based costing (ABC)?

Practice Questions

Q1
What is the primary focus of activity-based costing (ABC)?
  1. Allocating costs based on volume
  2. Identifying activities that drive costs
  3. Reducing fixed costs
  4. Simplifying cost allocation

Questions & Step-by-Step Solutions

What is the primary focus of activity-based costing (ABC)?
  • Step 1: Understand that activity-based costing (ABC) is a method used in accounting.
  • Step 2: Learn that ABC looks at different activities within a business.
  • Step 3: Identify what activities are important for producing goods or services.
  • Step 4: Recognize that ABC finds out how much each activity costs.
  • Step 5: Understand that costs are then assigned to products or services based on the activities they use.
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