Introduction to Limitations of Activity Based Costing
However this system is quite effective, it suffers from a number of limitations. These limitations are as follow:
Ø Activity Based Costing is a complex system and needs lot of tedious and records calculations.
Ø For small organizations, traditional cost accounting system might be more useful than Activity Based Costing because of the simplicity of operation of the former.
Ø Sometimes it is hard to attribute costs to single activities like some costs support various activities.
Ø There is a requirement of trained professionals who are limited in number.
Ø If there is a total support from the top management this system will be successful.
Ø Considerable investment of time and money is needed for the implementation of this system.
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Diagrams might be of different types, One-Dimensional Diagrams,Two-Dimensional Diagrams, Three-Dimensional Diagrams, Pictograms, Cartograms or Map Diagrams. Costing data are usually presented by one-dimensional or two-dimensional diagrams.
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