In this managerial accounting lecture video, Activity-Based Costing examples with discussion on cross-subsidization and comparison of simple costing and ABC are discussed (transcript is below).
Showing posts with label activity based costing. Show all posts
Showing posts with label activity based costing. Show all posts
What is Activity-Based Costing? A Managerial Accounting topic
What is Activity Based Costing?
In a traditional costing system, sometimes referred to as simple costing, costs are distributed evenly to the users of the costs. This can be not only an unfair process but also can lead management to make wrong decisions regarding product sustainability for the business.
For example, let us say there are three roommates: David, Matt and Brian. They began sharing the costs ($900 per months) equally but were not participating in the activities of living there equally. The activities that each roommate may have partook were eating, watching TV, and surfing the Internet.
For example, let us say there are three roommates: David, Matt and Brian. They began sharing the costs ($900 per months) equally but were not participating in the activities of living there equally. The activities that each roommate may have partook were eating, watching TV, and surfing the Internet.
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