What is the main focus of activity-based costing (ABC)?

Activity-based costing (ABC) primarily emphasizes individual activities as the fundamental cost objects. This approach recognizes that products or services consume activities, and those activities consume resources. By focusing on activities, ABC allows organizations to understand the specific costs associated with each activity involved in producing a product or delivering a service.

This method provides more accurate costing by assigning costs based on actual consumption of resources rather than relying on traditional costing methods, which often use broad averages. This leads to better insights into cost drivers, enabling more informed decision-making in pricing, budgeting, and financial planning.

In contrast, other approaches, such as average costing or summarizing costs across all units, do not account for the specific activities that incur costs and may result in less accurate cost information. Calculating depreciation based on fixed assets is a separate accounting procedure that does not align with the core concept of activity-based costing. Therefore, the correct answer highlights the unique focus that ABC brings to cost management and analysis.