About This Chapter
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
|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.|
1. 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.
2. Activity-Based Costing: Definition, Formula & Examples
Product costing is the process where businesses determine the expenses required for manufacturing a product. Learn the details of traditions vs activity-based costing, and the formula demonstrated in a set of examples.
3. The Activity-Based Costing Process
With computers, it's now possible to provide costs for virtually every activity that touches a product. In this lesson, we'll learn about the activity-based costing process and how it works.
4. Comparing Traditional Costing & Activity-Based Costing
In this lesson, we'll compare traditional costing with activity-based costing in order to help students determine the advantages of one particular method of costing over another.
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).
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Other chapters within the Accounting 102: Intro to Managerial Accounting course
- Overview of Managerial Accounting
- Cost Types
- Cost Behavior Analysis & Cost-Volume Profit
- Job-Order Costing & Process Costing
- Budgeting & Standard Costs
- Reporting Systems & Structures in Accounting
- Short & Long-Term Decision-Making in Accounting
- Basics of Financial Statement Analysis
- Studying for Accounting 102