Final answer:
Activity-based costing (ABC) is a method of management decision making that uses activity-based costing information to improve satisfaction and profitability.
Step-by-step explanation:
Activity-based costing (ABC) is a method of management decision making that uses activity-based costing information to improve satisfaction and profitability. ABC is a costing system that assigns costs to products or services based on the resources consumed by each activity. By allocating costs to specific activities, ABC provides more accurate information for decision making, as it takes into account the various cost drivers that influence each activity.
For example, in a manufacturing company, instead of simply allocating overhead costs based on direct labor hours or machine hours, ABC would assign overhead costs based on the activities that consume those resources, such as setup, materials handling, or quality control. This allows managers to have a better understanding of the true costs of products or services and make more informed decisions to improve customer satisfaction and overall profitability.