What is Activity-Based Costing, or ABC Costing

Methodology that provides precision to the costing of products or services, customers, distribution channels, routes, warehouses, regions, branches, or any other business segment.

Our methodology allows us to adapt to the needs of your project, whether operational, tactical or strategic; it allows us to reduce implementation and maintenance times of the cost system to generate results in a timely manner and guide us to capture the benefits that ABC offers in all types of industry.

Why does Activity-Based Costing provide cost precision?

Because the Activity-Based Costing cost allocation method is carried out in two steps:

In a first step, the costing of the activities and processes is carried out based on identifying each of the resources (materials, human, infrastructure, inputs) that are required to carry out each activity or process.

Example: The Production Line activity requires a series of resources, including: the salaries (direct labor) of the employees responsible for operating the line. It also requires electricity, maintenance inputs, steam, among other inputs.

In a second step, the costing of the cost objects is carried out, that is, it is the costing of each of the products, clients, regions of which the cost is desired. The costing in this second step is based on determining how much each product of each activity demands, or how much a client demands of each activity, or how much a region demands of an activity.

Example: The production of a product requires production time on the line, the supply of raw materials, quality control, product packaging and storage. Each of these activities must be costed prior to the costing of the product.

The Activity-Based Costing methodology applies to all types of industries: services, manufacturing, hospitals, logistics, government, financial, insurance, among others.