Question

ABC is more accurate, so what are some of its limitations? Why doesn't everyone use ABC?

Answer 1

	Following are the disadvantages of ABC costing:
1	Time Consuming:- It takes a lot of time and effort on the part of managers to gather data form different departments and then allocating
	various activities by identifying there respective cost drivers
2	Expensive to implement: Due to above increased efforts,more manpower are rquired to collect and interpret the data and hence it enhance the costs.
3	Not suitable for small business:- If a business have smaller operations and producing suppose a single or 2 products then ABC costing is just not suitable
	for those business, Instead applying a Single plantwide rate will suffice.
4	Regulations:- As per GAAP ABC costing is not used for external reporting, So ABC costing can only be used for internal use of top tier management.
	As from the above limitations it is clear that ABC costing is not made for some business, especially the smaller one with less capital or a company producing
	a single product or have a single activity. So these company can't use ABC even if they wish.
	Also due to regulatory requirements the management might have a view that if ABC costing can't be reported for external stakeholders then there is no point
	in making the same as it requires considerable extra effort then Traidtional costing.