What is the first step in the activity-based costing analysis?

The first step in activity-based costing (ABC) analysis involves gathering total costs and activity statistics. This step is crucial because it establishes a comprehensive understanding of all costs associated with the organization, including both direct and indirect costs. By collecting this data, healthcare managers can analyze how resources are consumed across various activities and departments.

This initial gathering of data allows for a detailed breakdown, enabling organizations to assign costs more accurately to specific activities based on actual consumption. It lays the groundwork for identifying cost drivers—factors that cause changes in costs—which is essential for subsequent steps in the ABC methodology.

To effectively implement ABC, having a robust dataset that reflects both total costs and the activities performed ensures that any analysis is based on accurate and relevant information, ultimately leading to better financial decision-making and resource allocation.