Question: Why would an activity-based costing (ABC) system appeal to some companies, and what is the criterion for utilizing an ABC system? Describe the advantages for

  1. Why would an activity-based costing (ABC) system appeal to some companies, and what is the criterion for utilizing an ABC system?
  2. Describe the advantages for using the ABC method versus a single plantwide rate or multiple departmental overhead rates; and specify any limitations that exist when using these conventional type overhead rates?
  3. Provide an example of a company that would benefit from using an ABC system, and describe a few of the different activities they might use.

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