When the model is completely built and you want to perform cost analysis, use Activity Based Costing (ABC). For each activity, you can define cost drivers, set frequencies, describe cost centers, and so on. When you are done entering your parameters, costs are generated and shown on the diagram.

Traditional accounting approaches assume products cause costs. You collect and report costs by assigning direct resource costs directly to products. However, because the focus is more on what was achieved rather than how it was achieved, traditional approaches might or might not reflect actual resource usage.

ABC assumes that Activities cause costs through the consumption of resources and that the demand for products cause these activities to be performed. ABC places activities between costs and products. It helps you see how effectively and efficiently resources are used and how activities in the enterprise contribute to the cost of the business. It helps management evaluate product and customer profitability and process performance.

ABC assigns costs to an activity by one of the following methods: