ABC (Activity-Based Costing)

Activity-Based Costing (ABC) is a method of allocating a company's costs to products or services based on the actual activities that generate those costs. Instead of spreading expenses evenly, ABC identifies specific activities—like processing orders or assembling products—and assigns costs based on how much each activity is used. This provides a more accurate picture of where resources are consumed, helping businesses understand true profitability of products or services and make informed decisions about pricing, cost control, and process improvements.