5.4 Activity-Based Costing

Activity-based costing (ABC) is a frequently used method in project budgeting. In activity-based costing, costs are initially assigned to the activities and subsequently to the projects based on each project's use of resources. As project activities are discrete tasks that need to be completed to deliver the project, the basis of Activity-based costing is that projects consume activities and activities consume resources (Maher, 1997).