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What insights could ABC provide regarding a company's profitability?

What insights could ABC provide regarding a company's profitability?

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Answer #1

Activity Based Costing (ABC) provides a better insight to the profit of the company than the traditional method of costing . ABC helps in calculating the profitability of the divisions within the company and judging which which division is earning higher profit and vice -versa.   

ABC not only helps in calculating division wise profitability but through the usage of various techniques it allows to check the individual product profitability.                                                 

So, it can be said that where traditional costing does not provide detailed analysis of the profitability however ABC provides an in depth analysis of the profitability.
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