ABSTRACT
This article is meant to provide the reader with a general understanding of activity-based costing (ABC), and its uses and benefits in the public sector. Some of the limitations of ABC are also covered. ABC is designed to provide information for strategic decisions. Applying this model to the public sector, ABC can provide information on the cost of providing government services for strategic decisions, such as determining the affordability of providing discretionary government services (e.g., picking up yard waste); setting user fees, both internally between agencies and externally, for billable government services (e.g., water and waste water services); and determining whether to outsource government services (e.g., trash pickup).
