ABC

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August 17, 2017 at 7:40 am #402159
adarsh1997
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Hi John!
Could you explain why the following statement about ABC is correct?
– ABC will be of limited benefit if the overhead represents a small proportion of the overall costs.
1. My understanding is that may be adopting ABC, a business could find out that in fact overheads do represent a large proportion of the overall cost.
2. Please locate where I am getting things wrong.
Thanks.
August 17, 2017 at 9:39 am #402171
John Moffat
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ABC does not change the total of the overheads, it only changes how the overheads are charged to the different products.
If total overheads are small then the overheads per unit will be small anyway.
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