Activity-based costing (ABC) is a method of cost allocation in companies. It is based on the idea that costs are incurred not only because of products or services, but also because of the activities and processes required to provide them.

ABC aims to accurately determine the actual costs of individual activities and processes and then allocate these costs to the products or services. This enables a more precise calculation of costs and a better insight into the profitability of the various business activities.

The application of ABC involves several steps. First, the various activities and processes that are carried out in a company are identified. Then, the costs for each activity are recorded, including direct costs such as labor and material costs, and indirect costs such as overhead.

By assigning costs to activities, companies can gain more accurate insights into the actual sources of costs. This enables better cost control, more efficient resource allocation, and identification of opportunities for cost reduction and process optimization.

ABC finds application in various industries and companies, especially those with complex production or service processes. It is particularly useful in areas such as manufacturing, healthcare, transportation, and project work where the accurate allocation of costs is of great importance.

In summary, Activity-based Costing (ABC) is a cost accounting method that allocates costs based on activities and processes. It allows a more accurate determination of actual costs and a better profitability analysis of products and business activities. ABC is an important tool for cost analysis and optimization in various industries.

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