Activity-based costing (ABC) is not just a cost collection mechanism, but rather more of an inventory valuation method. The main purpose for implementing an activity-based cost system is to try to overcome the cost distortions that occur in traditional costing from product differences when there are variations in size and complexity. However, one of the disadvantages of utilizing ABC is that the additional information gathering necessary to implement costing with that level of detail might be beyond the reach of some companies with a resource or financial constraints.

With this in mind, respond to the following questions:

• What kinds of industries or companies do you think would benefit most from using activity-based costing and why?
• In designing or modifying an accounting system to capture appropriate costs for ABC, what considerations do you think would need to be made?

Answer rating: 100% (QA)

Industries or companies that have a high level of product diversity complexity and variability in production processes are likely to benefit most from using activitybased costing ABC Here are a few ex... View the full answer