Implementing an ABC system should proceed only if management believes the benefits of doing so will exceed the costs. The costs of an ABC system are not difficult to quantify. They include identifying the key activities, developing an information system to record and report information, collecting data for activity measures, and maintaining the system. More difficult to quantify are the benefits of adopting an ABC system.
Required:
Can you identify some qualitative benefits of adopting ABC? Can any of these be quantified?
How could management deal with uncertainty related to any potential benefits of adopting an ABC system?