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    How effective is Activity Based Costing as an accounting system when compared with the traditional full cost absorption system?

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    How effective is Activity Based Costing as an accounting system when compared with the traditional full cost absorption system?

    Just looking for some info on ABC and why it is used a lot more nowadays than the more traditional systems. What are the main advantages of it over the full cost absorption system?

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    https://brainmass.com/business/financial-accounting-bookkeeping/activity-based-costing-example-problem-54787

    Solution Preview

    Absorption costing method or full costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a unit of product. Absorption costing is also referred to as the full cost method. The disadvantages associated with this method include:
    a. Inability to report individual product costs to a reasonable level of accuracy
    b. Inability to prodive useful feedback to mangement for the purpose of operational ...

    Solution Summary

    This solution discusses activity based costing and its effectiveness.

    $2.19

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