What is Activity-based Costing?

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

CIMA (Chartered Institute of Management Accountants) defines ABC as an approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs. Resources are assigned to activities, and activities to cost objects based on consumption estimates. The latter utilize cost drivers to attach activity costs to outputs.
-- Wikipedia
Legal Definition
Matching cost to activity. Any product uses activities, resources, and costs. This model was developed by Robert Kaplan and Robin Cooper in the late 1980s.