Selection of an appropriate costing method is important for accurate cost information and pricing decisions. When it comes to making pricing decisions, ABC can be very beneficial to management.
Since ABC provides more detailed information about where costs are coming from, management is in a better position to accurately determine product costs and make appropriate adjustments in pricing when necessary.
However, ABC costing does not always prove successful, as detailed in the following summary of the article from Management Accounting, "Can ABC Bring Mixed Results?" Which discusses Hewlett-Packard's Colorado Springs Division's experience with implementing an ABC system.
Question/explain why... What issues did HP run into with their implementation of their ABC system?
According to the article, what were the four main reasons that ABC did not work for the Colorado Springs Division?
What, if anything, could have been done differently to improve the results of their ABC system?