OUTSOURCING A-Z
Activity-Based Costing
Activity-based costing looks at aspects of an organization’s operations and attempts to answer the very simple, but sometimes hard to answer question, “How much does it cost to do that?” For example, how much does a company spend processing a receivable or taking a customer call? How much does it cost a city to fill a pothole? The term relates to outsourcing in that once an organization can answer the cost question at the activity level, it can more objectively compare the cost of internal versus external sourcing for performing it.
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