From the course: Excel: Management Accounting
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Basics of ABC - Microsoft Excel Tutorial
From the course: Excel: Management Accounting
Basics of ABC
- [Instructor] It's important to be able to use a wide variety of reporting tools to help a firm understand its positioning and maximize profit. Reporting is a key task for nearly all management accounting professionals. To that end, activity-based costing or ABC is a tool you'll wanna be familiar with. What is ABC? Or activity-based costing? Well, activity-based costing really lets us more efficiently allocate indirect costs to product categories. This is most commonly used in manufacturing but it can be applied to other industries, as well. Service firms, technology firms, and a variety of others. The goal is to help us to understand what the true cost is for every product we produce so that we can price effectively and, when necessary, weed out products that are not profitable. Management, in our example, has decided that all overhead costs have only three cost drivers or activities, as they're sometimes called. So, all of our overhead costs are gonna be allocated to either direct…
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