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In a growing technology company, ABC Ltd., there are two divisions: Software Development and Customer Support. The Software Development division incurs $2,000,000 in overhead costs,
In a growing technology company, ABC Ltd., there are two divisions: Software Development and Customer Support. The Software Development division incurs $2,000,000 in overhead costs, while the Customer Support division incurs $1,500,000. Describe the traditional costing and activity-based costing (ABC) methods, along with their respective allocations for each division. Analyze the differences in cost allocation between the two methods and discuss which approach provides a more accurate representation of costs and why.
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