Activity-based costing (ABC) is a costing method that:

a) Allocates overhead costs based on machine hours
b) Allocates overhead costs based on direct labor hours
c) Allocates overhead costs based on the number of units produced
d) Allocates overhead costs based on activities that drive costs

Activity-based costing (ABC) is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each. Therefore, this model assigns more indirect costs (overhead) into direct costs compared to conventional costing.