Abc Activity Based Costing Definition Here

Activity-Based Costing (ABC) is a costing method that assigns overhead and indirect costs to specific products, services, or customers based on the activities they actually consume. Instead of using a single broad cost driver (like machine hours or labor hours), ABC identifies the specific activities driving costs (e.g., setups, quality inspections, order processing) and assigns costs accordingly.

These are the factors that cause a change in the cost of an activity. Drivers are often transactional (e.g., number of purchase orders) or duration-based (e.g., machine hours). abc activity based costing definition

These are the final items for which costs are being measured, typically products, services, or even specific customers. How ABC Differs from Traditional Costing Activity-Based Costing (ABC) is a costing method that