COSTING

Costing

Costing

Activity Based Costing (ABC) is a method of measuring the cost and performance of an organization based on activities, which the organization uses in producing its output.

ABC is not a replacement for traditional general ledger accounting. Rather, it's a way to translate general ledger data into a format that helps managers make decisions.

The traditional cost management approach--in which cost allocation is based on labor hours, gallons, pounds or other units of output--rarely reflects the true cause-and-effect relationship between indirect and overhead costs and individual products, services, channels or customers.

ABC was developed as a practical solution for problems associated with ...