Implement Activity-Based Costing

The video tutorial explains the process of activity-based costing (ABC) in five steps: identifying activities, developing activity cost pools, calculating activity cost pool rates, allocating costs to products, and calculating unit product costs. It highlights the differences between classroom and practical applications, emphasizing the importance of cost drivers and the use of the predetermined overhead rate (POR) equation.

What is the first step in implementing Activity Based Costing?

• Identifying the activities

• Calculating the unit product cost

• Allocating costs to products

• Developing activity cost pools

In a practical setting, what is typically done to identify activities?

• Activities are predefined

• Activities are ignored

• Activities are randomly selected

• A detailed analysis is conducted

What is the purpose of developing activity cost pools in ABC?

• To assign manufacturing overhead to activities

• To estimate total production time

• To allocate direct labor costs

• To calculate direct material costs

How is the activity cost pool rate calculated?

• By multiplying direct materials by overhead

• By adding all direct costs

• By dividing total direct labor by total units

• By dividing estimated total activity cost pool by estimated total activity driver volume

What components are included in the unit product cost?

• Direct materials, direct labor, and manufacturing overhead

• Only manufacturing overhead

• Only direct materials

• Only direct labor