ABC Hierarchy - Limitations

The video tutorial explains activity-based costing (ABC), a method to allocate indirect costs to products or services. It highlights the ABC hierarchy, which involves identifying activities and assigning costs to production units. The tutorial discusses challenges like data collection and time consumption, and notes that ABC is mainly for internal use, not external reporting. It also addresses limitations, such as potential conflicts with existing budgeting methods and its suitability for organizations with significant overhead.

Why is collecting data for ABC considered costly and time-consuming?

In what scenarios is the ABC method most effective according to the text?