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Activity Based Costing

RogerRoger Just JoinedRegistered Posts: 2
Apparently this has not been in the exam for a long time.

Who knows we may have a question on it.

I am a bit confused with the following terms:

cost pool, cost driver

Could some help?


  • CathGCathG Well-Known Registered Posts: 145
    Hi - just done a search for Absorption Based Costing and found your unanswered post. Like you, I think this may come up in the exam - it was featured in the September magazine.

    I'm going to read up on it today.

    To quote the magazine:

    The starting point is to identify the major activities of the business that cause the indirect costs to be incurred (eg. materials handling, production set-up, quality control) The costs of each identified activity are grouped together in 'cost pools'. For each activity, the factor that causes costs to be high or low is identified - this factor drives costs and is thus known as the 'cost driver'

    The cost pool for an activity is then divided by the number of the identified driver for the period, to give a rate per cost driver - this is then used in much the same way as a traditional overhead absorption rate to charge overheads to production.

    I can't quite get my head round the workings at the moment, but at least if we're only asked what are cost pools and drivers I may be able to write down an understandable answer!

    Best of luck for anyone taking the exam tomorrow.:thumbup:
  • pinkpink Feels At Home Registered Posts: 35
    Oh no, I dont know anything about this Activity based Costing, I had a look at my notes but makes no sense at all really

    God help me tomorrow if it comes up!!
  • sarahwilsonsarahwilson Experienced Mentor Registered Posts: 567
    I know lord help me too!!
  • pinkpink Feels At Home Registered Posts: 35
    I really hope its just a word question and that all of the variances are not based on it
  • CathGCathG Well-Known Registered Posts: 145
    I think it will just ask what is ABC or how does it differ to absorption costing. We couldn't work out the variances, it's far too complex and would take too long. (I hope) :001_unsure:

    Also another definition to learn - what's Total Quality Management, that could come as well. These are odd questions the examiner likes to throw in at the end and probably only earn one or two points - but it may make the difference between a pass or fail.
  • pinkpink Feels At Home Registered Posts: 35
    Thanks Cathg

    I feel better now, I was starting to feel like everything I have been studying and worrying about had been a waste of time!

    I was just looking at the June 05 paper, as it comes up in that one
  • umerali2003umerali2003 Trusted Regular Registered Posts: 400
    absorption based costing ........ oh my God .... i hope so it wont come in da exam if it does then i am in a real trouble i hope so it wont come finger crossed
  • umerali2003umerali2003 Trusted Regular Registered Posts: 400
    i hope so if it comes it will come like a small written question but if they asked to calculate the variance on those basis oh boy .. it will be a real tough one
  • RichardRichard Trusted Regular Registered Posts: 373
    Activity Based Costing was featured in the final part of the June 08 MAC exam, and only required a brief written answer.
  • Tinkerbell007Tinkerbell007 Feels At Home Registered Posts: 64
    I just saw this mentioned on another thread and am off to do some serious cramming now! :001_smile:

    Really hope its just a written question!
  • pinkpink Feels At Home Registered Posts: 35
    Have just been reading up on this

    But can anyone tell me in a way a simple way that I can actually understand (I hate reading notes!) what is the difference between ABC costing and absorption costing??

    One thing was that ABC uses alot more calculations than the traditional absorbtion costing.... but i cant just write that can I? I know there must be more to it than that, just cant get my head around it right now :-(
  • Tinkerbell007Tinkerbell007 Feels At Home Registered Posts: 64
    Hey Pink

    Just looking in the BPP book now at this - production overheads in absorption costing are abosrbed on the basis of labour hours/machine hours etc regardless of what causes the overhead.

    Under ABC the overheads are broken down in their various elements - eg: costs related to receiving stock, issuing materials etc

    Does this help?
  • pinkpink Feels At Home Registered Posts: 35
    Hi Tinkerbell

    Thanks for this, is does kind of but I think my brain just cant take no more and wont fit it in LOL!!

    i rememebr last time having a big panic about something and then it not even coming up in the exam - lets thats the case this time hehe!!
  • Tinkerbell007Tinkerbell007 Feels At Home Registered Posts: 64
    I know the feeling!! I think my brain is melting!

    One more past paper tonight and then that's it methinks....

    I really hope they are nice to us tomorrow.....
  • pinkpink Feels At Home Registered Posts: 35
    I think its hard when your used to doing these past papers over and over again, like I look at June 2008's and I think, its not that hard how could I have failed, but its seeing something first the first time that freaks me out a bit.....I am dreading opening the paper tomorrow, but not much more i can do or learn now!!
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