This assignment allows students to apply their managerial accounting knowledge in an interactive story that focuses on activity-based costing (ABC). Students will identify how ABC impacts the gross margins of businesses compared with other costing methods, helping them practice making critical business decisions to increase profitability.

Learning objectives

1. Recognize the limitations of traditional costing methods, including how they can distort product profitability through misallocated overhead.
2. Identify and separate common costs from traceable overhead to see why common costs should not be assigned to individual product lines.
3. Apply ABC to reallocate overhead based on the actual activity drivers, improving the precision of product-level margins.
4. Diagnose business problems, such as the death spiral and cross subsidization, and use ABC insights to prevent misguided business decisions.

Suitable courses: Managerial

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