To demonstrate bow ABC analysis exposes the
relationsbips between activities and resource consumption
and, ultimately, profits, let's start by
focusing on products. Traditional cost accounting
systems use bases like direct labor and machine
bours to allocate to products tbe expenses of indirect
and support activities, including engineering
cbanges, setups, and parts maintenance. In contrast,
activity-based costing segregates tbe expenses of
indirect and support resources by activities. It tben
assigns tbose expenses based on tbe drivers of tbe
activities.