ABC
(It's as easy as 123)
ABC stands for Activity Based Costing. It has a few benefits, such as:
- It provides more accurate costs for each unit of a product (or service)
- It gives a better understanding of the business to managers
It's fairly simple to the more traditional costing methods we've looked at already, but with a key difference: ABC looks at activities as a way of accumulating costs, instead of the old method of using cost centres. So with ABC the costs will be driven by:
