Activity Based Costing- ABC
Financial Dictionary — Business & Management
Definition
Alternative costing method for strategic management; divides production into activities, defines costs for activities, and allocates costs to objects based on activity consumption
Common Uses
- Used in planning, organizing, and controlling business operations.
- Used when setting KPIs, policies, procedures, and improving processes.
- Used when setting KPIs, policies, procedures, and improving processes.
Practical Example
- Example: Management applies **Activity Based Costing- ABC** when designing policies and monitoring performance against targets.
Why This Term Matters
- Why it matters: Improves execution, accountability, and decision speed while reducing operational waste.