From the course: Applying Managerial Accounting
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Activity-based costing
From the course: Applying Managerial Accounting
Activity-based costing
- One of my clients, a large government department, bills its customers for providing a range of products and services. In fact, they have to charge customers in a way that fully recovers the cost of providing these products and services. This means that they need to capture not just the direct costs of doing business, such as frontline staffing costs, but also any indirect costs, such as IT and other systems. To achieve this they use a managerial accounting technique known as activity-based costing, or simply ABC. By the way, there's an entire course on ABC in the LinkedIn Learning Library. Just pop activity-based costing in the search bar and away you go. Okay, an ABC is produced by identifying something called overhead cost pools, and then the outputs of the business, say the products the organization produces, and then finally linking these two things together using something called a cost or activity driver. Traditional…
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