Activity-based costing question 4 options:

a. allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
b. accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.
c. assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools allocates overhead directly to products and services based on activity levels

The correct answer is A. allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.

Explanation:

The System of Costs Based on ABC Activities (Activity Based Costing) is a model that allows the allocation and distribution of the different indirect costs, according to the activities carried out, since these are the ones that really generate costs. This system stems from the need to solve the problem normally presented by standard costs, when they do not faithfully reflect the value added chain in the development of a particular product or service, and therefore, an adequate determination of the price.

The ABC cost model allocates and distributes indirect costs according to the activities carried out in the process of manufacturing the product or service, identifying the origin of the cost with the necessary activity, not only for production but also for distribution and sale; The activity is understood as the set of actions that aims to incorporate added value to the product through the manufacturing process. Complementing the definition of activity, it should be mentioned that the ABC Model is based on the fact that products and services consume activities, and these in turn are the ones that generate costs.

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