It ONLY makes sense to implement an ABC system when: A. ABC provides information to make better decisions. B. Its benefits exceed implementation costs. C. ABC traces more costs as direct costs. D. There is a strong cause-and-effect relationship between costs in the cost pools and their cost-allocation bases.

Question

Business

Zack Bailey

20 June, 20:30

It ONLY makes sense to implement an ABC system when: A. ABC provides information to make better decisions. B. Its benefits exceed implementation costs. C. ABC traces more costs as direct costs. D. There is a strong cause-and-effect relationship between costs in the cost pools and their cost-allocation bases.

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Sumo · Answer 1

B. Its benefits exceed implementation costs.

Explanation:

As all accounting and managerial method and procedures is subject to the cost/benefit rule before application.

The cost to achieve information must be lower than the benefit this information brings.

The company will first check for this, it will look for the cost to find the activities and to identify the cost driver and evaluate the potential benefit of this new way to determinate the overhead per product.

Only if this benefit exceeds the cost the comapny will implement ABC cost