Term -ABC

Activity based costing (ABC) is an accounting system that assigns costs to products based on the resources they consume. The costs of all activities are traced to the product for which they are performed. Overhead costs are also traced to a particular product rather than spread arbitrarily across all product lines. The true cost of a product can be determined with much more fidelity than was previously available with a traditional accounting system. An ABC system gives visibility to how effectively resources are being used and how all activities contribute to the cost of a product.

Navy Acquisition Reform.

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