Activity-Based Costing: Benefits and Implementation

This lecture covers the concepts of traditional costing methods and the emergence of Activity-Based Costing (ABC). It explains how ABC assigns overhead costs based on activities, providing a more accurate product cost for pricing and decision-making. The instructor discusses the strengths and weaknesses of traditional costing methods, highlighting the benefits of ABC in offering detailed cost measures and better activity understanding. Through examples, the lecture demonstrates the differences in unit costs between traditional and ABC methods, emphasizing the importance of accurate overhead allocation. The presentation concludes by showcasing how ABC can lead to a better understanding of product costs, aiding in pricing and product elimination decisions.