Activity Based Costing (with full-length example)

This video explains the process of Activity-based Costing and illustrates how Activity-based Costing is used with an example.
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Now that I watched this video, I'm wondering why my professor took two weeks to explain what you did in 25 minutes. Though I will say that I watch this video at 1.5x speed (just because I can follow it when it's faster, not because you talk slowly), so even less time to comprehend the basis of this subject. Thank you!

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Glad to hear you found the video helpful!

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Prashant, Comments like these give me the motivation to keep making more videos. Thanks so much! I'm working on getting all the KZbin videos up on my website: www.Edspira.com. Managerial accounting will be posted within the week. Good luck on the CPA exam!

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[@cookingforfools8691]

Thanks for the easy to follow instructional video. The only thing that I found a little confusing was that you set up a separate cost bucket for assembly. It seems like that would fall under a direct labor cost. I've worked for three different manufacturing companies, and they all used the divide-overhead-costs-by-total-labor-hours method. ABC makes much more sense to me.

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I'm glad these videos have helped you. Best of luck to you in your future endeavors!

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Assembly isn't an overhead, it is a direct cost. Good presentation - there is a lot of bla bla bla about ABC in textbooks when it is simply measuring things at greater granularity - "it's all in the details."

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Good Elaboration .............

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[@ttig4044]

You could've went into to product cost per unit and all that other Jazz but for the content covered, its a good video.

[@davidrovere2899]

I really like your videos, I find them very helpful. I just wonder why you included SGA into the 1M OH cost. I assume by the exemple that you are treating product costing therefore you're allocating manufacturing OH. SGA wouldn't apply into the manufacturing OH concept. Is this some king of general overhead? Or, is the activity based costing a completely separate method to evaluate manufacturing cost from product costing? Again, thanks for your videos, I hope you are finishing your PHD soon and Education Unlocked goes mainstream.

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Thanks for this. A great refresher. One question I have is what would happen if 1 order had multiple products? Would you have to split the order into decimals?

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I would like to thank you for your support

[@Edspira]

No problem my friend!

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[@perrybarnacle]

Good overview of the method. In practice, ABC costing is a great way to arrive at a potentially bad managerial decision. Allocating indirect costs to arbitrary cost drivers is ineffective. Strategic Cost Transformation by Reginald Tomas Lee outlines a more sensible approach.