ABC

is an acronym for Activity Based Costing.

Activity-Based Costing (ABC) assigns overhead and indirect costs to products/services based on activities that drive costs. It improves cost accuracy compared to traditional volume-based allocations.

- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.

- Example: The costing team uses **ABC** to allocate costs and analyze margins by product line.

- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.