Explore commonly used personal finance terms.
Activity-Based Costing (ABC) is a costing method that allocates costs to products or services based on the actual activities and resources required for production. Unlike traditional costing, which might allocate overhead costs broadly, ABC focuses on identifying specific cost drivers, such as labor hours, machinery usage, or material consumption. This approach helps businesses understand the true cost of production, optimize processes, and improve profitability by providing a more accurate breakdown of where resources are utilized and expenses incurred.
