Activity-based costing

CIMA (Chartered Institute of Management Accountants) 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. ICMAB (Institute of Cost & Management Accountants of Bangladesh) defines activity-based costing (ABC) as an accounting method that identifies the activities that a firm performs and then assigns indirect costs to cost objects.