Fill in the Blank QuestionFill in the blank question. (Identifying, Assigning,Tracing) activities is the first step in applying activity-based costing.

The correct answer to fill in the blank is Identifying.

Explanation

Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each. The first crucial step in applying ABC is the identification of activities. This involves understanding the various activities that consume resources within a company and categorizing them so that costs can be allocated accurately based on the extent to which each activity is used by products. Once activities are identified, they can then be traced back to the products or services that utilize them, allowing for a more precise allocation of costs and ultimately leading to better decision-making regarding pricing, budgeting, and financial strategy.

In summary, it is essential to begin with identifying activities as it lays the groundwork for the subsequent processes involved in activity-based costing.