As ABC systems get very detailed and more cost pools are created, more allocations are necessary to calculate activity costs for each cost pool, which increases the chances of misidentifying the costs of different activity cost pools.

Question

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As more cost pools are created in an ABC system, there are more allocations required to calculate activity costs for each cost pool. This can increase the chances of misidentifying the costs of different activity cost pools if the allocations are not done accurately or if there is not enough supporting data to accurately determine the cost drivers for each activity cost pool.

As ABC Systems Get Very Detailed and More Cost Pools