What best describes an "activity-based costing" model?

An "activity-based costing" model is best described as one that assigns costs to activities based on resource consumption. This method focuses on identifying the specific activities that consume resources and then allocating costs accordingly. By doing so, it provides a more accurate picture of where and how costs are incurred within an organization, enabling better decision-making regarding budgeting, pricing, and process improvement.

This approach is particularly valuable because it goes beyond traditional costing methods, which may simply allocate costs based on broad measures such as labor hours or machine time. Instead, activity-based costing takes into account the complexity of operations and the different drivers of costs associated with each activity. As a result, organizations can identify areas where efficiency can be improved and costs can be managed more effectively.