Understanding the Complexity of ABC and Implications of Inaccurate Data One of the disadvantages of activity based costing is the amount of information it requires. To reliably calculate costs using...

Implications of Inaccurate Data

One of the disadvantages of activity based costing is the amount of information it requires. To reliably calculate costs using an ABC system, a company must have information about total overhead costs and how those costs are divided into various categories. ABC also requires data about a variety of cost drivers that are used to allocate the cost pools.

Required:

1. Explain how a company can accumulate this information. Include the identity of any persons responsible for providing the necessary data.

2. Explain how inaccuracies in the cost pool estimates or cost driver estimates would impact the company.