what is ABC analysis

ABC analysis is tool of the cost accounting and and used in the process of decision making in management accounting you just have to divide you cost in two three parts that is a category cost ,b category cost and c catogery cost in which a is the constituents of the cost which have exposure in to cost say 70- 90 b category say 5-8% and c category up to 3%

Activity Based Costing is a two-stage approach used in managerial accounting. In regular accounting costs r distributed to centers or departments (allocating to centers based on a manager’s best guess). ABC uses “activities” to accumulate costs. ABC is a method used to determine which activities r actually using the resources (costs) for a company’s departments, products & even customers. An ABC cost system attempts to determine what activities drive actual costs instead of applying an allocation method. It tries to be more accurate than a manager’s best guess by looking at cost drivers like the duration of an activity, intensity of an activity, or number of transactions. ABC systems attempt to find the “roughly right” cost of producing products, services, or maintaining customers. The information gathered from ABC systems help managers to make more informed & hopefully better decisions regarding the business.