What is the first step in determining total cost accumulation?

• A. Assign all expenses to specific cost centers.
• B. Allocate non-revenue producing cost centers to revenue producing cost centers.
• C. Assign all costs assigned to revenue producing services.
• D. List all direct and indirect facility operations expenses.

Answer: (D)

Identify every cost tied to running the facility, including both direct costs that can be traced to a specific service and indirect costs that support the whole operation. This gives you the complete total cost pool to work from. Without listing all direct and indirect facility expenses first, you don’t have an accurate starting point for cost accumulation.

After you’ve captured the full cost pool, you then allocate or assign those costs to cost centers, determine how overhead is spread to revenue-producing activities, and decide how to treat costs that support but don’t directly generate revenue. The other steps rely on having a complete tally of all expenses, which is why listing all direct and indirect facility expenses is the essential first step.