Question

One of the demerits of Activity Based Costing is that it DOESNOT classify the costs into​

Answer 1

Answer:

ABC will be of limited benefit if the overhead costs are primarily volume related or if the overhead is a small proportion of the overall cost. It is impossible to allocate all overhead costs to specific activities. The choice of both activities and cost drivers might be inappropriate.

Answer 2

Answer:

Absorption-costing, or full costing, has for years been the most common method of allocating manufacturing overhead. This approach takes the full amount of manufacturing overhead and spreads it equally across the production volume of all products. It does not consider that certain products may be responsible for more or fewer costs from specific activities. Activity-based costing, also known as ABC, deals with this problem.