Page 37 - P1 Integrated Workbook STUDENT 2018
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Activity based costing
3.2 Disadvantages of ABC
Disadvantages
Arbitrary cost apportionments are still required.
It can be costly to implement.
The choice of activities and cost drivers might be inappropriate.
3.3 Favourable conditions for ABC
Production overheads are high relative to direct costs.
Diversity in the product range.
Diversity of overhead resource input to products.
Consumption of overhead resources is not driven primarily by volume.
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