Activity based costing have four steps, the steps are as follows:
1. Identification and classification of all the activities in the value chain in relation to the production of the product.
2. Estimation of total cost for each of the activities identified.
3. Computation of a cost driver rate for each activity based on a cost allocation base which has a causal link to the cost of the activity.
4. Application of the activity cost to product using the appropriate cost driver rate.
