Activity-Based Costing

Activity-Based Costing (ABC) is a method used by businesses to assign costs to specific activities involved in producing goods or services. Unlike traditional costing, which allocates overhead costs broadly, ABC identifies the actual resources consumed by each activity. This provides a more accurate picture of where money is spent and helps businesses understand the true cost of products or services. As a result, companies can make better decisions about pricing, budgeting, and process improvements, leading to increased efficiency and profitability.