What is the purpose of activity-based costing information in decision-making?

The purpose of activity-based costing (ABC) information in decision-making is primarily to facilitate better management decisions regarding customer satisfaction. ABC provides detailed insights into the costs associated with specific activities and processes, allowing managers to understand which activities contribute most to the costs and which are critical to customer value. This level of detail helps managers identify opportunities for improvement, cost reduction, and enhanced service delivery, ultimately leading to increased customer satisfaction.

Benefits of ABC include the ability to categorize costs more accurately according to activities, rather than spreading costs evenly across products or departments. This granularity helps managers make informed decisions regarding product pricing, customer profitability, and resource allocation in ways that directly align with customer needs and preferences.

Focusing on customer satisfaction enables companies to enhance their value propositions, tailor their services, and respond more effectively to market demands. As such, the use of ABC in this context becomes a strategic tool in both operational and financial decision-making processes, driving better outcomes in customer engagement and retention.