Activity based costing - ABC

Activity-Based Costing - ABC is a method of allocating indirect costs for ongoing activity, and these costs are then linked to different products. Activity-Based Costing is based on the link between costs, ongoing activities and the processed product, and distributes the costs accordingly. This way, the costs are distributed less arbitrarily than when indirect costs (overhead) are distributed in proportion to the direct costs (the full-cost method).

ABC is primarily used in the manufacturing industry. It is useful for analyzing and optimizing the profitability of a production flow.

The method enables converting indirect costs (electricity costs, etc.) to direct costs.

tracezilla facilitates using the activity-based costing method, so the actual costs of the production (e.g. laboer hours, electricity etc.) are linked to the specific batch and thereby reflects the real value of the product.