It is a costing method that assigns overhead and indirect costs to
specific business activities, giving a more accurate view of product
or service costs. It works by identifying activities (like
production, packaging, or delivery), measuring their cost drivers,
and linking them to products based on actual resource use.
There are two main types: transaction-based (counts activity
frequency) and duration-based (measures time spent). ABC is used in
manufacturing, services, healthcare, and logistics to improve
pricing, budgeting, and efficiency.
It matters because it helps businesses identify waste, improve profitability, and make better strategic decisions.
In which business process?
Conclusion: [ .. ] gives a clearer, smarter picture of where
money is really spent, helping leaders make data-driven choices.
FAQ: What’s the difference between ABC and traditional
costing? → ABC uses activities instead of broad cost averages.
Keywords: cost drivers, process efficiency, cost allocation,
management accounting.
Examples: Toyota, IBM, and hospitals use ABC to control
costs.
Articles: “Harvard Business Review – The Hidden Costs of
Cost Accounting.”
