Traditional costing systems are more suited to organisations which produce a variety of products and costs are a relatively small percentage of total costs. This differs from organisations in which indirect costs forma proportion of total costs, increased exists and there are more diverse outputs and processes such that an ABC costing systems is more suited. Hierarchy of activities are -level activities where activities performed on each individual unit of a product or service; -level activities activities related to a group of units of products or services rather than to each individual unit of product or service; output- activities: activities undertaken to support categories of outputs (products and services), irrespective of the number of units or batches in which the units are produced activities: activities that support the organisation as a whole but do not have a cause-and-effect It is important to classity costs into a cost because costs in different pools relate to different cost-allocation bases and not all cost-allocation bases are unit level