The benefits of adopting ABC/ABM are higher for companies in competitive markets because
A)accurate product cost information is essential to be competitive, regardless of the cost.
B)ABM can pinpoint opportunities for cost savings, which increase the company's profit or are passed on to customers through lower prices.
C)ABM allows managers to ignore competition when making pricing decisions thus making more accurate decisions.
D)the more competitive the market, the more likely the competition is using ABC.
E)ABC/ABM should not be used in a competitive market because traditional costing is less expensive allowing for lower prices.

Question

Quizplus · Accepted Answer

In competitive markets, companies need to constantly look for ways to reduce costs and offer lower prices to customers. Adopting ABC/ABM can help identify areas where cost savings can be made, which can then be passed on to customers through lower prices, giving the company a competitive advantage. Accurate product cost information is also essential in competitive markets, making choice A a partially correct option, but not the best choice. Choice C is inaccurate as ignoring competition when making pricing decisions can lead to inaccurate decisions. Choice D is also incorrect as the competition using ABC does not directly impact the benefits for a company adopting it. Choice E is also not a valid option as traditional costing may not provide accurate product costing information and may actually result in higher costs in the long run.

The Benefits of Adopting ABC/ABM Are Higher for Companies in Competitive