Types of activities and drivers
Students will understand how Activity Based Costing allocates costs using multiple cost drivers and activity types, moving beyond traditional volume-based methods. This lesson covers the practical implementation of ABC, including its benefits, limitations, and real-world scenarios where it delivers the most value, with worked examples demonstrating accurate cost calculation.
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In this lesson
- 0:00 Four Activity Levels in ABC
- 2:25 Calculating Product Costs Using ABC
- 7:12 Four Types of Cost Drivers
- 11:23 Northwood PLC Worked Example
- 12:26 Identifying an Intensity Driver
About this lesson
You’ll learn how Activity-Based Costing (ABC) classifies activities and identifies the cost drivers that cause costs to arise. The lesson explains unit, batch, product and facility-level activities, then shows how to identify activities, create cost pools, allocate costs and charge products according to their use of each activity. You’ll also distinguish between volume-related, transaction, intensity and duration drivers, with practical examples and a worked Northwood PLC objective test question. This is particularly useful for CIMA Management Accounting when applying ABC and selecting the correct cost driver in an exam.
Duration: 14m
- Activity Based Costing (ABC) principles
- Cost drivers and activity identification
- Cost allocation methods
- ABC implementation benefits and costs
- Cost driver selection and hierarchy
- ABC vs traditional costing comparison
Transcript
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