Solution

Activity-based costing (ABC) is a system that focuses on activities as the fundamental cost objects. It involves identifying and analyzing activities within an organization and assigning costs to those activities. The cost of these activities is then used for compiling the costs of products and other cost objects. ABC recognizes that products or services consume different activities, and the costs associated with those activities should be allocated accordingly. By allocating costs based on the activities that drive them, ABC provides a more accurate and detailed understanding of product costs compared to traditional costing methods. Marginal costing, process costing, and job costing are different costing methods, but they do not specifically focus on activities as the fundamental cost objects.