Definition __exclusive__ | Activity Based Cost

Instead of spreading overhead costs evenly (like butter over too much toast), ABC traces expenses—such as machine setups, quality inspections, or customer support calls—directly to the specific activities that drive them. Then, it assigns those costs only to the products or services that use those activities.

✅ – Stop subsidizing inefficient products. ✅ Identifies waste – See which activities add cost without value. ✅ Better pricing & strategy – Price based on real consumption, not rough averages. ✅ Process improvement – Target high-cost activities for automation or redesign. activity based cost definition

ABC is powerful but detailed. It works best when the cost of errors from traditional costing is high—think complex manufacturing, diverse service lines, or multi-channel retail. Instead of spreading overhead costs evenly (like butter

Enter —a method that assigns costs to products or services based on the actual activities and resources they consume. ✅ Identifies waste – See which activities add

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