§ It can be applied to derive realistic costs in a complex business environment.
§ ABC can be applied to all overhead costs, not just production overheads.
§ ABC can be used just as easily in service costing as in product costing.
§ Criticisms of ABC:
§ It is impossible to allocate all overhead costs to specific activities.
ABC costs are based on assumptions and simplifications. The choice of both activities and costs drivers might be inappropriate.
§ ABC can be more complex to explain to the stakeholders of the costing exercise.
§ The benefits obtained from ABC might not justify the costs.
