Activity Based Costing
30 min! Run Time
Employees
only
Provided
Skills covered in this course
Description
This is a 29-slide PowerPoint presentation.
Activity Based Costing (ABC) is a methodology for assigning costs to the activities that truly drive them, making it more accurate than traditional costing methods. It is a valuable technique for several reasons:
- ABC reveals the true profitability of product lines, customer segments, distribution channels, geographies and other market segments.
- ABC supports strategic decisions, from choosing target markets and the optimal product mix to making informed pricing decisions.
Specifically, ABC works by matching the logical flow of costs to true cost economics, and by mapping costs from resources to activities to the cost objects that drive them. This course explains a 7-phase approach to Activity Based Costing and includes examples.
System Requirements
See System Requirements in the Coggno Knowledge Base
Author
What Is Flevy?
Flevy develops management training guides of the same caliber as those produced by top-tier management consulting firms, like McKinsey, Bain, Accenture, BCG, and Deloitte. In fact, our authors include ex-consultants from all these firms. Most of our materials were developed by seasoned executives and consultants with 20+ years of experience.
Activity Based Costing
This is a 29-slide PowerPoint.
Activity Based Costing (ABC) analysis is a methodology for assigning costs to those activities that truly drive these costs. It is more accurate than traditional costing methods. It is a valuable technique to know for a number of key reasons:
* ABC allows you to develop a picture of the true profitability of product lines, customer segments, distribution channels, geographies, and other market segments.
* ABC aids in a number of strategic decisions, from determining target markets to selecting the optimal product mix to making informed pricing decisions.
Specifically, ABC leads to a more accurate assignment of costs to cost objects through a process of:
* Matching the logical flow of costs through the cost system to the economics of true cost flows.
* Mapping costs from "resources" (e.g. wages paid, supplies purchased) to activities performed (e.g. units manufactured) to cost objects (e.g. products, customers, distribution channels) that drive those costs.
ABC is an invaluable tool for making strategic decisions, as it allows you to develop a picture of true profitability of product lines, customer segments, geographies, distribution channels, and other markets. This document explains a 7-phase approach to Activity Based Costing and includes examples.