ABC cost pools are created to correspond to the activities performed in an organization that cause the consumption of overhead resources. Therefore, the total number of ABC cost pools will definitely exceed one (as in the plantwide approach) and it is likely to exceed the number of departments within a company (as in the departmental approach) since more than one activity is often performed within each department.

Could you please research and explain what kind of problems are not known when a company uses direct material and direct labor? Also, could you please research and provide an example how activity-based costing overcome the issues you mentioned in the above statement? Be specific in providing your explanation.