From the course: Excel: Management Accounting
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Assigning indirect costs - Microsoft Excel Tutorial
From the course: Excel: Management Accounting
Assigning indirect costs
- [Instructor] Indirect costs are a very important cost component for most firms, and activity-based costing takes these into account by letting us allocate them based on production output. So let's take a look and see how this is done in practice, shall we? I'm in the 03_03_Begin_ABC file. Now, we have Acme Inc., our car company, and they produce two products, the economy car, and the sports car. We of course have direct costs associated with these products, and those are shown on the direct tab here. We've already taken into account those direct costs, now we need to make sure that we're properly accounting for our indirect costs. When it comes to the indirect cost, we have two major categories right now, shipping and licensing. Economy cars, product A, are a smaller product, and thus the shipping fees are less on them. The Licensing fees are the same between economy cars and sports cars. So we've allocated $2,000 in shipping for economy cars, and $3,000 for sports cars. We've…
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