Activity Based Costing
Activity Based Costing (ABC) is a cost accounting methodology that assigns overhead and indirect costs to products and services based on the activities that drive those costs. It identifies cost drivers and allocates expenses more accurately than traditional costing methods, providing a clearer picture of profitability. This approach is widely used in manufacturing, services, and project management to improve financial decision-making.
Developers should learn Activity Based Costing when working on financial software, enterprise resource planning (ERP) systems, or analytics tools that require precise cost tracking and allocation. It is particularly useful in industries with complex overhead structures, such as manufacturing or consulting, to optimize pricing, budgeting, and resource management. Understanding ABC helps in building applications that support data-driven financial insights and operational efficiency.