Editing Activity-based costing (section)

{{Short description|Method of apportioning costs}}
{{cleanup|reason=the article is not well organised|date=January 2020}}
{{Accounting}}
{{Use dmy dates|date=September 2020}}
'''Activity-based costing''' ('''ABC''') is a [[costing]] method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each. Therefore, this model assigns more [[indirect costs]] ([[overhead (business)|overhead]]) into [[direct costs]] compared to conventional costing.

The UK's [[Chartered Institute of Management Accountants]] (CIMA), defines ABC as an approach to the costing and monitoring of activities which involves tracing [[resource consumption]] and costing final outputs. Resources are assigned to activities, and activities to cost objects based on consumption estimates. The latter utilize cost drivers to attach activity costs to outputs.<ref name=":0">{{cite book|title=CIMA official Terminology, 2005|page=3|url=http://www.cimaglobal.com/Documents/ImportedDocuments/cid_tg_activity_based_costing_nov08.pdf.pdf}}</ref>

The [[Institute of Cost Accountants of India]] says, ABC systems calculate the costs of individual activities and assign costs to cost objects such as products and services on the basis of the activities undertaken to produce each product or services. It accurately identifies sources of profit and loss.<ref>{{Cite web |title=(pdf) Pg: 231 |url=https://icmai.in/upload/Students/Syllabus2016/Final/Paper-15-Feb-22.pdf}}</ref>

The [[Institute of Cost & Management Accountants of Bangladesh]] (ICMAB) defines activity-based costing as an accounting method which identifies the activities which a firm performs and then assigns indirect costs to cost objects.<ref>{{cite book|title=Bangladesh Cost Accounting Standards-14: Activity Based Costing|url=http://icmab.org.bd/index.php/2014-10-26-10-09-15/professional-standard}}</ref>