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Unformatted text preview: ABC systems require many calculat ions to determine costs of products and services. Activit ycost rates often need to be updated regularly. Very detailed ABC systems are costly to operate and difficult to understand. Somet imes the allocat ions necessary to calculate activit y costs often result in act ivit ycost pools and quant ities of costallocat ion bases being measured with error. When measurement errors are large, activit ycost informat ion can be misleading. 512 No, ABC systems apply equally well to service companies such as banks, railroads, hospitals, and account ing firms, as well merchandising co mpanies such as retailers and distributors. 513 No. An act ivit ybased approach should be adopted only if it s expected benefit s exceed it s expected costs. It is not always a wise invest ment. If the jobs, products or services are alike in the way they consume indirect costs of a company, then a simple costing system will suffice. 52 514 Increasing the number o f indirectcost pools does NOT guarantee increased accuracy o f product...
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This note was uploaded on 10/11/2010 for the course ACCT 321 taught by Professor Cole during the Spring '10 term at University of Miami.
- Spring '10
- Cost Accounting