Activity-based costing is a costing technique that assigns costs to cost objects such as products or customers, based on the activities those cost objects require.

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Activity-based costing (ABC) is designed to assign costs to cost objects based on the activities that are required to produce them. ABC is typically used when traditional costing methods, such as direct labor or machine hours, are not accurate or do not reflect the true costs of producing a product or serving a customer. ABC identifies the activities that go into producing a product or serving a customer and assigns costs based on the resources consumed by each activity. This results in more accurate cost information, which can be useful for decision-making and cost management.

Activity-Based Costing Is a Costing Technique That Assigns Costs to Cost