ABC answers the question: "What does each activity actually cost us, and who is using it?"
Most traditional accounting methods lump overhead costs (like rent, utilities, and admin salaries) into a single pool and spread them evenly across all products. This often leads to "peanut butter costing"—smearing costs evenly when some products take much more work than others. definition of abc costing
ABC Costing reveals the truth: Product B requires 80% of the setup labor. ABC shifts those setup costs onto Product B, showing that it is actually far less profitable than it seemed. ABC answers the question: "What does each activity
Stop Guessing Your Costs: The Definition of ABC Costing definition of abc costing
ABC answers the question: "What does each activity actually cost us, and who is using it?"
Most traditional accounting methods lump overhead costs (like rent, utilities, and admin salaries) into a single pool and spread them evenly across all products. This often leads to "peanut butter costing"—smearing costs evenly when some products take much more work than others.
ABC Costing reveals the truth: Product B requires 80% of the setup labor. ABC shifts those setup costs onto Product B, showing that it is actually far less profitable than it seemed.
Stop Guessing Your Costs: The Definition of ABC Costing
