alleryStart learning →What is a danger of ABC, like other cost allocation approaches?
AIt ignores all labour
BFixed costs look variable
CIt excludes overheads
DIt requires no data input
Answer & Solution
Correct answer: B. Fixed costs look variable
Allocating fixed costs to products can make fixed costs look variable and mislead decisions such as dropping products.
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Related questions
In the CIMA description of ABC, activities are assigned to what?In which journal did Cooper and Kaplan publish ABC articles from 1988?Drucker said ABC also records the cost of what?What limits the use of ABC, especially in services?The chief executive's salary stays unassigned in ABC. What are such costs termed?Why did indirect costs rise relative to direct costs in modern factories?How does ABC assign costs, rather than using broad arbitrary percentages?Broad overhead percentages on common costs risk what outcome among products?