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SPECIAL REPORT

Activity-Based Costing (ABC)

Accounting for Operational Readiness

Far from novel, Activity-Based Costing first surfaced as various commercial businesses began to experience difficulties in accounting for indirect and overhead costs. ABC solved this problem by directly tracing overhead costs to the processes that generate products—outputs. By providing accurate cost measures, ABC has helped improve product costing, strategic pricing, and profit planning.

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From the March/April 2008 issue of Serviam.