Traditional costing answers, "What did we spend?" Activity-Based Costing answers, "Why did we spend it, and who should pay for it?"
ABC is powerful but detailed. It works best when the cost of errors from traditional costing is high—think complex manufacturing, diverse service lines, or multi-channel retail. activity based cost definition
#ActivityBasedCosting #CostAccounting #FinanceBasics #BusinessStrategy #ProfitabilityManagement Traditional costing answers, "What did we spend
✅ – Stop subsidizing inefficient products. ✅ Identifies waste – See which activities add cost without value. ✅ Better pricing & strategy – Price based on real consumption, not rough averages. ✅ Process improvement – Target high-cost activities for automation or redesign. Traditional costing answers
Enter —a method that assigns costs to products or services based on the actual activities and resources they consume.