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Ch 7: Activity-Based Costing Overview

About This Chapter

Use this chapter to catch up on an overview of activity-based costing. If learning about accounting on your home-based computer doesn't work with your schedule, our mobile-friendly platform lets you use your favorite Wi-Fi devices to take your studying practically anywhere you go.

Activity-Based Costing Overview- Chapter Summary

When it comes to determining the cost of a product or service, there are many other connected costs that must be considered. In this chapter, our instructors will teach you about how these connected costs can be configured through the activity-based costing methodology. To make this complex methodology easier to understand, our instructors have divided the chapter into shorter lessons. Each lesson describes a different aspect of this methodology, allowing you to master the method one piece at a time. Once you complete the entire chapter, you will be able to:

  • Describe the seven steps used in activity-based costing
  • Identify activity-based drivers and cost pools
  • Analyze the methods in which overhead is allocated
  • Define the levels of activity in an activity-based costing system
  • Examine the limitations and benefits of activity-based costing
  • Point out examples of activity-based management (ABM)
  • Explain how service industries can utilize activity-based costing
  • Assess how the theory of constraints relates to lean manufacturing

8 Lessons in Chapter 7: Activity-Based Costing Overview
Test your knowledge with a 30-question chapter practice test
The Seven Steps of Activity-Based Costing

1. The Seven Steps of Activity-Based Costing

This lesson will help you understand why activity-based costing is used instead of traditional costing and teach you about the seven steps associated with it.

Identifying Activity-Based Cost Pools & Drivers

2. Identifying Activity-Based Cost Pools & Drivers

In this lesson, you'll learn about the usefulness of defining the activities needed in order to make your product. You'll see how activity-based cost helps you calculate a more accurate overhead cost.

Allocating Overhead in Activity-Based Costing Systems

3. Allocating Overhead in Activity-Based Costing Systems

In this lesson, you'll learn how you can calculate your overhead by figuring out the cost of each activity you do to make a product. You'll also read about dividing your costs into batch-related costs and per-unit costs.

Activity Levels in an Activity-Based Costing System

4. Activity Levels in an Activity-Based Costing System

With ABC, or activity-based costing, we must first identify into which activity category a cost should be placed. In this lesson, we learn about the four general groups associated with ABC: unit-based, batch-based, product-based, and facility-based costs.

Benefits & Limitations of Activity-Based Costing

5. Benefits & Limitations of Activity-Based Costing

Managers need the best information they can get about product cost so they can accurately determine a product's selling price. In this lesson, you'll learn about activity-based costing (ABC).

Activity-Based Management (ABM): Definition & Examples

6. Activity-Based Management (ABM): Definition & Examples

This lesson explains the concept of activity-based management and how it extends the use of activity-based costing. Learn how this costing method is used as a comprehensive management tool to reduce costs and improve processes and decision-making.

Activity-Based Costing & Service Industries

7. Activity-Based Costing & Service Industries

Activity-based costing is common in manufacturing, but can it be applied to service industries too? In this lesson you'll find out what activity-based costing is, how it works in service industries, and some of the benefits and challenges of using it.

Lean Manufacturing & the Theory of Constraints

8. Lean Manufacturing & the Theory of Constraints

In this lesson, you'll learn about lean manufacturing and the elimination of waste in the world of business. We'll define the term and build a connection to the theory of constraints.

Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
Not Taken
Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
Not Taken

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