Activity-based costing is the control system that identifies various activities needed to provide a product and determines the cost of those activities.

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Activity-based costing (ABC) is a control system that identifies activities and their costs to determine the true cost of a product or service. It is a methodical approach that allocates overhead costs based on the activities that drive costs rather than traditional methods that rely on direct labor, machine hours or units produced. ABC is used to make more informed business decisions, such as pricing, cost control, and process improvements, by providing detailed insight into which activities are adding the most value and which ones are not.

Activity-Based Costing Is the Control System That Identifies Various Activities