Question

The benefits of adopting ABC/ABM are higher for companies in competitive markets because ________?

1) they can better allocate costs to products and services
2) they can improve their pricing strategies
3) they can identify and eliminate non-value-added activities
4) they can gain a competitive advantage by understanding their costs better

Answer 1

Adopting ABC/ABM in competitive markets helps companies with cost allocation, improving pricing strategies, eliminating waste, and gaining competitive advantage, ultimately benefiting consumers, companies, and the national economy.

Step-by-step explanation:

The benefits of adopting Activity-Based Costing (ABC) and Activity-Based Management (ABM) are higher for companies in competitive markets because they allow businesses to better allocate costs to products and services, improve their pricing strategies, and identify and eliminate non-value-added activities. These factors contribute to companies having a clearer understanding of their costs, which can lead to competitive advantage. This more informed understanding enables companies to be more efficient and make strategic decisions that help to optimize their operations in the midst of competition, which often leads to the offering of better or less expensive products that may increase their profits and the income of their employees. As a result, the overall economy benefits as well since the gains outweigh the potential losses.