Final answer:
ABC costing benefits are greater for companies with complex product lines and indirect costs, enabling more accurate cost allocation and better decision-making. It aids in optimizing product profitability, pricing, and resource management.
Step-by-step explanation:
The benefits of using the ABC (Activity-Based Costing) system are higher if the company operates in a complex environment with numerous products and indirect costs. ABC costing provides a more accurate method of cost allocation, which is particularly beneficial for firms with diverse product lines and significant overhead costs.
It assists in decision-making by comparing marginal costs and marginal benefits, as well as guiding actions such as whether to continue production when the price falls below the average variable cost (AVC).By employing ABC costing, companies can see which products are more profitable and make informed decisions about pricing, product mix, and process improvements.
Furthermore, the cost/benefit analysis can lead to better management of resources and maximize overall profits, leading to competitive advantages as businesses offer better or less expensive products, increase their profits, and provide higher income for employees, contributing positively to the nation's economy.