The ABC of Rocket Ship Accounting

ABC or Activity Based Costing is simply a way or assigning overheads or fixed period costs to either production costs or servicing costs. ABC divides production or services into core activities, defines costs for those activities, and allocates those costs to products or services based on consumption of the activities. ABC allows business managers to better understand product, service and customer profitability.This provides the business with better information to make value-based and therefore more effective decisions.