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Q – Describe four signs that help indicate when ABC systems are likely to provide the most benefits. A – 1) Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity.2) Products that a company is well suited to make and sell show small profits; whereas products that a company is less suited to produce and sell show large profits. 3) Operations staff have substantial disagreement with the reported costs of manufacturing and marketing products and services. 4) Significant amounts of indirect costs are allocated using only one or two cost pools. Instructor’s Q – Why would the difference in profits for specific products be an indicator?Criteria – NoneReference: Horngren, C. T., Datar, S.M., Foster, G., Rajan, M., & Ittner, C. (2009). Cost Accounting: A Managerial Emphasis (13th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

The difference in profits for specific products is an indicator in case of ABC costingas the objective is to maximize profits (Horngren, 2009, p. 44). Activity based costingcan help a firm…


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