Activity-Based Costing (ABC) is a method of assigning costs to products, services, or activities based on the actual activities that drive those costs. It is a cost accounting technique that aims to provide a more accurate picture of an organization's costs by identifying the specific activities that consume resources.
These are the specific tasks, events, or units of work performed within an organization, such as machine setups, quality inspections, or order processing. abc activity based costing definition
The primary difference lies in how indirect costs—like rent, utilities, and administrative salaries—are handled. Activity-Based Costing (ABC) is a method of assigning
Activity-based costing (ABC) is a sophisticated accounting methodology that assigns overhead and indirect costs to products and services based on the specific activities they consume. Unlike traditional costing, which often spreads overhead evenly based on production volume, ABC provides a granular view of costs by identifying the causal relationships between resources, activities, and final outputs. Core Components of the ABC Model The primary difference lies in how indirect costs—like