Activity based costing - part 2
Taught by Nick Drape · AI tutor support included
In this lesson, you'll learn how to calculate the overhead cost per unit using Activity-Based Costing through a practical worked example.
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In this lesson
- 0:00 Activity-Based Costing introduction
- 2:56 Calculating the cost driver rate
- 5:23 Determining cost per unit of product
- 7:04 ABC hierarchy framework explained
- 10:29 Comparing ABC with Absorption Costing
- 15:01 Classifying costs using ABC hierarchy
About this lesson
You'll work through the step-by-step process of identifying cost drivers, calculating cost driver rates, and allocating overhead costs to specific products — a core skill for PM, MA, and FA papers. The video then introduces the ABC hierarchy developed by Kaplan and Cooper, which classifies activities into unit level, batch level, product sustaining, and facility sustaining categories. Understanding this hierarchy helps you identify the most appropriate cost driver for any activity and explains why ABC often produces different product costs than traditional Absorption Costing, particularly when batch and product sustaining activities are significant.
Duration: 19m
Transcript
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