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Alternative costing principles

2.2 Advantages of ABC

When compared to other costing systems ABC has the following
advantages and disadvantages.

 Costs are understood better.

 Costs are absorbed better.

 Cost control can be improved.

 Pricing decisions can be improved.

 Decision making can be improved.

 ABC can be used in service industries.

2.3 Disadvantages of ABC

 Arbitrary cost apportionments are still required.

 It can be costly to implement.

 The choice of activities and cost drivers might be inappropriate.

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