An activity-based costing system traces costs to activities and then to products and other cost objects.

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Activity-based costing (ABC) is a cost accounting method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption of each activity. ABC traces costs to activities and then to products and other cost objects, providing a more accurate view of the true costs of products and services.

An Activity-Based Costing System Traces Costs to Activities and Then