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2) Activity-based costing (ABC) is a costing system that was developed in the 1980s as a result of an increasing awareness in businesses of the
2) Activity-based costing (ABC) is a costing system that was developed in the 1980s as a result of an increasing awareness in businesses of the deficiencies of traditional approaches to production overhead absorption. a. Describe the main deficiencies in the traditional product costing system which ABC seeks to correct. b. Identify and comment upon a significant advantage and a significant disadvantage C. associated with the typical implementation of an ABC system A tree nursery is considering a change of product mix in its inventory. The manager wants to estimate the product cost of different types of trees. There are no activities that lead to direct costs. Indirect costs are identified and estimated for the following activities: watering, repotting and administration. Total estimated annual costs for each activity, the cost driver for each activity and the expected annual usage of each cost driver are as follows: Activity Estimated costs Cost driver Estimated usage of cost driver Watering Repotting 50.000 100.000 Number of threes 500.000 Number of repots 200.000 Number of different types of threes 500 Administration 75.000 What are the estimated costs of 100 royal oaks, each of which requires one repotting each year
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