Foremost, the number of work-in-process accounts used is an issue. In a job order cost system, only one work in process account can be used. In a process cost system, multiple work-in-process is used...

The total number of ABC cost pools will definitely exceed one (as in the plant-wide approach) and it is likely to exceed the number of departments within a company (as in the departmental approach) since more than one activity is often performed within each department...

The cost associated with packaging a product can be identified as too high. Therefore a meaningful cost analysis can be extracted ? Facilitates better decision making with scarce resources as only costs that need to be measured and that relate directly to the activity are measured ? Shows cost consequences of resource management decisions What are some limitations of ABC? ? Difficulty in assigning some overhead costs (such as the CEO's salary) to products ? whilst this is a lump sum that does not relate to the individual product, it must nevertheless be met by a contribution from the activity ? It is argued that costs that are untraceable to products should be arbitrarily allocated to products, however this reduces the usefulness of ABC as a cost information system to management ? This argument can result in management using creative accounting to find other ways of representing these costs in reporting statements Conclusion ? ABC costing systems yield more useful and accurate information through their extensive use of cost drivers ? Despite some limitations, it has become a widely used information system for managers, to develop cost analysis and facilitate decision making

Direct materials 2. Direct labor 3. Production process are purchased applied to completed 4 Direct materials product 5. Goods are shipped are placed into 6...