Activity-Based Costing

• An advantage of ABC is that it provides better information on how costs arise and are related to products
• An advantage of ABC is that it considers that costs do not only vary with production volume but also depend on complexity
• An advantage of ABC is that it makes the cost of excess capacity visible
• ABC is beneficial when full costing is showing minor differences between products that are easy and difficult to make
• A disadvantage of ABC is that activities and cost drivers can be hard and expensive to identify and quantify
• ABC levels: unit, batch, product, facility