Fundamentals of Activity-Based Costing

Enroll in the free Fundamentals of Activity Based Costing to learn from basics. Taught by experts on Meaning and definition of Activity Based Costing, Flow of cost in ABC, Cost driver and more. Start today!

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About this Free Certificate Course

This free course on the Fundamentals of Activity-Based Costing covers all the essentials you need to know. We'll start with the concept of ABC, a costing method that assigns costs to products and services based on the activities involved in producing them. ABC helps companies allocate costs more accurately and efficiently, leading to better decision-making. We'll explore the uses and flow of cost in ABC, including identifying cost drivers and how costs impact the final product or service. You'll also learn about emerging costing approaches that have been developed in recent years.

Finally, we'll compare a traditional costing system to ABC using a case study to highlight the advantages of using ABC. Whether you're a student or a professional looking to expand your knowledge, this course is an excellent resource. You'll gain a comprehensive understanding of Activity-Based Costing and its uses in modern business. By the end of the course, you'll have a solid foundation to help you succeed in your career.

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Course Outline

Concept of Activity Based Costing
Uses and Flow of Cost in ABC
Emerging Costing Approaches
Case Study-Traditional Costing System vs ABC

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5.0

Comprehensive and Practical Learning Experience.
I enjoyed how the course covered both theoretical concepts and practical skills. The curriculum was well-structured, and the quizzes and assignments helped solidify my understanding. The tools provided were easy to use, and the instructor was clear and knowledgeable.
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5.0

The Cost Accounting Explained Was Truly Good, the Teaching Was Also Good.
I liked the ease of the course and the explanation given by the tutor, as well as the teaching pace of the topics.

Fundamentals of Activity-Based Costing

3.0 Learning Hours . Beginner

Why upskill with us?

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1000+ free courses
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Frequently Asked Questions

How long does it take to complete this free Fundamentals of Activity-Based Costing course?

Fundamentals of Activity-Based Costing course is a 2.0 hour long course but it is self-paced. Once you enroll, you can take your own time to complete the course.

Will I have lifetime access to the free course?

Yes, once you enroll in the course, you will have lifetime access to any of the Great Learning Academy’s free courses. You can login and learn whenever you want to.

Will I get a certificate after completing this Fundamentals of Activity-Based Costing Free course?

Yes, you will get a certificate of completion after completing all the modules and cracking the assessment. 

How much does this Fundamentals of Activity-Based Costing Course cost?

It is an entirely free course from Great Learning Academy. Anyone interested in learning Fundamentals of Activity-Based Costing can start this course.

Is there any limit on how many times I can take this free course?

Once you enroll in the Fundamentals of Activity-Based Costing Course, you have lifetime access to it. So, you can log in anytime and learn it for free online.

Who is eligible to take this Fundamentals of Activity-Based Costing Course?

You do not need any prerequisites to learn the course, so enroll today and learn it for free online.

What are the prerequisites required to learn this Fundamentals of Activity-Based Costing Course?

You do not need any prior knowledge to learn this Fundamentals of Activity-Based Costing Course. 

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Fundamentals of Activity-Based Costing


Activity-based costing (ABC) is a costing method used by businesses to determine the true cost of products and services by assigning costs to activities involved in their production. This approach provides a more accurate and detailed breakdown of costs than traditional costing methods. The concept of ABC was developed in the 1980s to address the limitations of traditional costing methods, which often relied on arbitrary allocation of indirect costs to products or services. ABC, on the other hand, identifies the cost drivers or activities involved in producing each product or service and allocates costs based on their consumption of those activities. This helps companies understand the true cost of each product or service and make better-informed decisions.

The uses of ABC go beyond just determining the cost of products or services. It also helps companies identify inefficiencies in their operations and eliminate non-value adding activities. This, in turn, can lead to cost savings and increased profitability. By identifying and allocating costs to activities, ABC can also provide insights into where resources are being wasted and where improvements can be made. The flow of cost in ABC is a critical component of the method. In traditional costing, indirect costs are typically allocated based on a single cost driver, such as direct labor hours. In ABC, costs are allocated to multiple cost drivers or activities, each of which contributes to the final cost of the product or service. For example, a product may require multiple activities such as machine setup, material handling, and quality control. By allocating costs to each activity, ABC provides a more accurate picture of the total cost of producing the product.

Emerging costing approaches have built upon the principles of ABC and aim to provide even more accurate and relevant cost information to companies. One such approach is time-driven activity-based costing (TDABC), which simplifies the process of assigning costs to activities by using time as the single cost driver. TDABC uses time equations to calculate the cost of each activity, making it easier and less expensive to implement than traditional ABC. Another approach is resource consumption accounting (RCA), which takes a broader view of resource consumption, including non-financial resources such as energy and water. A case study comparing a traditional costing system to ABC can illustrate the advantages of using ABC. In the case of a company manufacturing two products, Product A and Product B, a traditional costing system allocated overhead costs based on direct labor hours. Product A required more direct labor hours than Product B, resulting in a higher allocation of overhead costs to Product A. However, when using ABC, it was discovered that Product B required more material handling activities than Product A, resulting in a higher allocation of overhead costs to Product B. This led to a more accurate picture of the true cost of each product and helped the company make better decisions about pricing and resource allocation.

In conclusion, activity-based costing is a powerful tool that can help companies understand the true cost of their products and services. By identifying cost drivers and allocating costs to activities, ABC provides a more accurate and detailed breakdown of costs than traditional costing methods. ABC also has a range of uses beyond cost allocation, including identifying inefficiencies and making process improvements. Emerging costing approaches such as TDABC and RCA build upon the principles of ABC and aim to provide even more accurate cost information. Overall, ABC is a valuable tool for companies looking to improve their understanding of costs and make better-informed decisions.

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