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Ch 5: Basics of Activity-Based Costing

About This Chapter

Take a look at these lessons to find out how activity-based costing can help or hinder managerial accounting. Review them and take the quizzes on your own schedule with any device that has Internet access.

Basics of Activity-Based Costing - Chapter Summary and Learning Objectives

Traditional costing systems use formulas that determine the general costs of business, but often these formulas are not 100% accurate. Activity-based costing (ABC) allows for more precise calculations, and this chapter will demonstrate how ABC can be implemented. To better understand this complex costing system, our instructors have split the topic into several lessons to help you comprehend the associated accounting terminology as well as the situations in which ABC is used. In the connected lessons, you will learn about the following:

  • Which factors drive up costs and how those costs are allocated
  • Managerial accounting equations that determine per-product cost
  • Criteria for assigning costs to different pools
  • The differences between ABC and other costing formulas

Lesson Objective
Identifying Activity-Based Cost Pools & Drivers Define activity cost pools, point out the per-unit cost of cost drivers, explore the managerial accounting method, and use ABC strategies to determine product prices.
Activity-Based Costing: Definition, Formula & Examples Explain the uses for ABC in managerial accounting, go over costing formulas, and review costing examples.
The Activity-Based Costing Process Determine overhead cost assignment strategies in connection with the activity cost pool, figure out activity rates, show the connection between cost objects and overhead costs, and understand the steps for management report preparation.
Comparing Traditional Costing & Activity-Based Costing Compare ABC with a traditional costing system, justify the benefits of ABC, and provide definitions for the following: cost driver, activity, and activity cost pool.
Benefits & Limitations of Activity-Based Costing Explore the advantages and disadvantages of ABC, and identify professional situations where implementing ABC provides the best option.

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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