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ACCA Applied Skills · Performance Management · Activity-based costing

Which of the following is a typical reason for grouping several activities into a single cost pool in an ABC system?

Activities should be grouped into one cost pool when they share the same cost driver, because one rate per driver unit can then fairly absorb all their costs. Location, cost behaviour or product are not valid pooling criteria.

  1. AThe activities all have the same cost driverCorrect
  2. BThe activities are all carried out in the same department
  3. CThe activities all have fixed costs
  4. DThe activities relate to the same product

Explanation

Costs of different activities can be pooled where they are driven by the same cost driver, since a single rate then applies to all of them. Being in the same department, being fixed, or relating to one product does not by itself justify pooling.

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