Activity-based costing helps identify various activities that explain why costs are incurred.

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Activity-based costing (ABC) is a costing technique that identifies various activities that drive costs within an organization. By breaking down costs into activities, ABC provides managers with a more accurate understanding of why costs are incurred, and how they can be managed more effectively. This approach is particularly useful in complex organizations where traditional methods of cost allocation may not accurately reflect the true cost drivers.

Activity-Based Costing Helps Identify Various Activities That Explain Why Costs