Question

Benefits/limitations of ABC/ABM systems

a. Increased accuracy, higher costs
b. Better decision-making, complexity
c. Reduced complexity, reduced accuracy
d. Cost control, inefficiency

Answer 1

ABC/ABM systems provide increased accuracy and better decision-making, but can also come with higher costs and complexity. They can help reduce complexity and provide cost control, though inefficiency can be a drawback.

Step-by-step explanation:

The benefits and limitations of ABC (Activity-Based Costing) and ABM (Activity-Based Management) systems are:

1. Increased accuracy - ABC/ABM systems provide more accurate information about the costs and profitability of different activities or products. This can help managers make better decisions and allocate resources more efficiently. However, implementing and maintaining ABC/ABM systems can be expensive.
2. Better decision-making - ABC/ABM systems provide a clearer picture of the costs and benefits associated with different activities or products. This can help managers make more informed decisions and prioritize resources effectively. However, the complexity of these systems may require training and expertise.
3. Reduced complexity - ABC/ABM systems can help simplify the allocation of costs and resources by focusing on the key activities or processes that drive costs. This can make the overall accounting and management process less complex. However, this simplified approach may sacrifice some accuracy.
4. Cost control - ABC/ABM systems can help identify and control costs by analyzing the costs of specific activities or products. This can enable managers to focus on cost reduction and elimination of activities that do not add value. However, inefficient implementation and lack of alignment with organizational goals can lead to inefficiency.