Analyze the major benefits and major weaknesses of traditional Activity-Based Costing (ABC) in determining accurate overhead costs over an ABC system. Provide a rationale for your response. Suggest the manner in which a business can achieve a competitive advantage in the marketplace through the use of ABC. Provide two (2) reasons to convince senior management that they should implement an ABC system.
In the field of accounting, activity-based costing and traditional plays a critical role as far as the organization is concerned. The knowledge of activity-based costing many times has proven to be essential to managers through proper management of product information and creating a clear product cost. Using the costing methods has helped in making correct decisions towards selling price, product design and product restore among other crucial things. The significance of this paper will be to look at how Activity based costing is crucial to management of any organization in a competitive market.