In this weeks reading, the authors showed how the ABC application was used in the construction industry, comparing three types of rebar used for specific construction projects. It was shown that the company had undercosted two of the types of rebar, while the third type of rebar was overcosted. With this example in mind, consider the following issues.
Why is the ABC described in the reading this week, unacceptable for external financial reports? What type of reporting is it acceptable to use on?
In what fundamental ways does ABC differ from traditional costing methods?
Why are top management support and cross-functional involvement crucial when attempting to implement an ABC system?
