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    Activity based costing vs. step down allocation method

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    What is the relationship between the concepts cost allocation basis as used in the step-down method and cost driver as used in ABC?

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    The "cost allocation basis" is the activity used to spread costs to a cost object. For instance, you can use labor hours to spread overhead to jobs in a factory. Or you can use headcount to spread department costs to production. Both step-down and activity based costing use cost allocation basis as the way they spread costs to the area that is supposed to absorb the indirect costs. There is no ...

    Solution Summary

    Your tutorial is 201 words and gives an example to illustrate how the cost allocation basis is the same in both methods.