Student Reviews
( 5 Of 5 )
1 review
Video of Activity Based Costing Cost Accounting CPA Exam BAR CMA Exam in Costs Accounting course by Farhat Lectures. The # 1 CPA & Accounting Courses channel, video No. 15 free certified online
What is activity-based costing and why is it more accurate than traditional costing? In this cost and managerial accounting lecture, Professor Farhat introduces activity-based costing, explaining the limitations of a single overhead rate, the ABC concept that activities consume resources and products consume activities, the five cost levels, and how ABC assigns non-manufacturing costs. CPA and CMA candidates and accounting students will find this essential BAR exam material.
Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students.
Video Timeline & Key Concepts:
0:00 — The limitation of traditional costing
2:04 — The ABC approach and the five cost levels
10:12 — Computing activity rates and cost drivers
13:28 — Assigning non-manufacturing costs under ABC
Frequently Asked Questions:
Why can traditional costing distort product costs?
Traditional costing uses a single allocation base such as direct labor hours, which assumes all products consume resources equally. This can over-cost simple products and under-cost complex ones.
What is the core idea of activity-based costing?
The core idea is that activities consume resources and products consume activities. Overhead is assigned based on the activities each product actually uses.
What are the five cost levels in ABC?
ABC categorizes costs into unit level, batch level, product level, facility level, and customer level, reflecting how each cost is actually incurred.
Can ABC assign non-manufacturing costs?
Yes. Unlike traditional costing, ABC can assign non-manufacturing costs such as sales commissions or shipping to products, giving a more complete view of profitability.
Is this tested on the CPA exam?
Yes. Activity-based costing is tested in the BAR section and on the CMA exam as part of cost accounting.
#CPAexam #CMAexam #enrolledagentexam #accountingcourses #collegecourses #courses #BAR #activitybasedcosting #ABC #costaccounting #ProfessorFarhat