What things really cost
Cost behaviour, overheads and activity-based costing.
- Level
- Bitesize
- Learning time
- 1 hour 15 minutes
- Where
- Finance for Non Finance Professionals
- Price
- £39
When you step up to a higher level, what you paid in the last 12 months for lower-level courses inside the bigger course comes off its price, in proportion to how much of each is inside it, whichever topic it's from. Courses at the same or a lower level don't give credit against each other. A Focus course or above always costs at least £15. Read the full terms
Certificate of Completion
Overview and Outcomes.
Overview
This module examines how costs behave and why that matters for board decisions. It sets out fixed, variable, semi-variable and stepped costs, contribution and break-even through an illustrative leisure centre, and the difference between average and marginal cost. Drawing on Arkes and Blumer's work on the sunk cost effect, it shows which costs belong in a decision and offers a six-step cost-literate decision cycle. This module examines what services really cost once shared overheads are counted, and why that is a governance question. It compares absorption and marginal costing, shows how blunt allocation and averages distort, and sets out Cooper and Kaplan's activity-based costing and Kaplan and Anderson's time-driven version. It covers full cost recovery, building trustworthy unit costs with Goodhart's law in mind, and NHS patient-level costing.
What you'll develop
In this Bitesize, you will develop the ability to:
- Distinguish fixed, variable, semi-variable and stepped costs, and direct from indirect costs, in a budget or options paper.
- Calculate contribution, break-even volume and margin of safety for an activity, and explain how a stepped cost changes the result.
- Judge which costs belong in a decision, distinguishing marginal from average cost, excluding sunk costs and unchanged overheads, and including opportunity costs.
- Compare absorption and marginal costing, and identify which lens suits the decision in front of the board.
- Explain how blunt overhead allocation and averages distort cost, and how activity-based and time-driven costing link cost to activity.
The Modules.
1 hour 15 minutes of learning.
- 10Understanding CostThis module examines how costs behave and why that matters for board decisions. It sets out fixed, variable, semi-variable and stepped costs, contribution and break-even through an illustrative leisure centre, and the difference between average and marginal cost. Drawing on Arkes and Blumer's work on the sunk cost effect, it shows which costs belong in a decision and offers a six-step cost-literate decision cycle.38 min
- 11Full Cost, Overheads and Activity-Based CostingThis module examines what services really cost once shared overheads are counted, and why that is a governance question. It compares absorption and marginal costing, shows how blunt allocation and averages distort, and sets out Cooper and Kaplan's activity-based costing and Kaplan and Anderson's time-driven version. It covers full cost recovery, building trustworthy unit costs with Goodhart's law in mind, and NHS patient-level costing.39 min
Keep going.
Part of the Finance for Non Finance Professionals topic, also sold whole as Follow the money.
Go deeper, and pay only the difference
- You are hereBitesize, 1 hour 15 minutes, £39
- Next stepFocus, Numbers that tell the truth, 4 hours, £69. Already own the Bitesize? You pay £30.
- Explore, Managing the money, 5 hours 30 minutes, £129. Already own the Bitesize? You pay £90.
- The whole topicImmerse, Follow the money, 11 hours, £249. Already own the Bitesize? You pay £210.
When you step up to a higher level, what you paid in the last 12 months for lower-level courses inside the bigger course comes off its price, in proportion to how much of each is inside it, whichever topic it's from. Courses at the same or a lower level don't give credit against each other. A Focus course or above always costs at least £15. Prices per person. Read the full terms
Other Bitesize in the Finance for Non Finance Professionals topic
- Did we live within our means?The language of finance and the income statement2 hours£39
- Reserves and cashThe balance sheet, reserves and cash flow1 hour 15 minutes£39
- Reading between the linesReading accounts and spotting warning signs1 hour 15 minutes£39
- When the numbers misleadCreative accounting and external audit1 hour 15 minutes£39
- Value for money, budgets that workInvestment appraisal and budgeting approaches1 hour 15 minutes£39
- Keeping the budget honestBudget monitoring, capital and borrowing1 hour 15 minutes£39