What does ABC stand for?

ABC Stands for Activity Based Costing
ABC Stands for? activity based costing

What is Activity-Based Costing?

Activity-based costing (ABC) is a tool that is used to charge the cost to the products according to the activities performed that incurred cost & only that Specific cost is charged to the product which is concerned & incurred by performing activities in making that product.

In an Activity-based costing System, only that manufacturing cost is applied to the product that is incurred in making activities performed to make a specific product & it also includes those Non-Manufacturing costs which are concerned with a particular product.

Benefits of ABC Costing System?

There are various benefits of an Activity-based cost system such benefits are;

  • This Costing system shows a clear picture of costs that are charged to the products.
  •  In the ABC costing system, Only costs are becoming the part of the product that is concerned in making that product.
  •  This costing system provides a true picture of product & service costing.
  •  While using an Activity-based costing system that provides accurate price decisions because in this system all the things are clear and concise.  
  •  In this costing system, different cost pools are introduced for different activities.