Final answer:
A company may choose to stick with a traditional costing method instead of ABC due to cost and complexity, the accuracy vs. usefulness trade-off, and familiarity and compatibility with the existing system.
Step-by-step explanation:
A company may choose to stay with a traditional costing method instead of the Activity-Based Costing (ABC) method for several reasons:
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- Cost and complexity: Implementing and maintaining an ABC system can be costly and complex. It requires gathering and analyzing detailed information about various activities and their costs. Some companies may find it more efficient and cost-effective to continue using a traditional costing method.
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- Accuracy vs. usefulness: While ABC provides a more accurate allocation of costs, it may not always be necessary for decision-making. Traditional costing methods, such as direct labor or machine hours, may provide sufficiently reliable information for the company's needs.
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- Familiarity and compatibility: Companies that have been using a traditional costing method for a long time may have established systems and processes that are well-aligned with it. Switching to ABC may require significant changes in the organization's structure, operations, and reporting.
Ultimately, the decision to stick with a traditional costing method or adopt ABC depends on the specific needs and circumstances of each company.