ActivityBased Costing
Activity-Based Costing (ABC) is an advanced cost accounting technique that identifies activities within an organization and assigns the cost of each activity to all products and services according to their usage. It provides a more accurate representation of product costs, enabling better decision making in areas such as pricing, product design, and process improvement. ABC focuses on the causal relationship between business activities, resources consumed, and the resulting costs, providing a detailed understanding of where money is being spent and why. By allocating overhead costs to products based on their actual usage of resources, managers gain greater visibility into profitability at a more granular level and can make informed decisions regarding resource allocation, cost reduction, and product line optimization.