Conventional Cost Allocation Systems versus Activity Based Cost Essay - 2

Conventional Cost Allocation Systems versus Activity Based Cost Systems - Essay Example Quite a number prefer the ABC systems over the traditional cost allocation systems. One issue that has been pointed out when comparing the cost systems is the accuracy. Martin (59) argues that the ABC systems are more accurate than the conventional system. The information that is delivered through this system is more precise and can help the management in decision-making. This means for effective use of this system there should a combination of the internal decision making with the external reporting system (Kaplan 58). The fact that there are no details that are assumed by the ABC system according to her proposition. In support of the conventional systems, the issue of efficiency and effectiveness arises. While the ABC system is efficient it provides so many details that are not necessary for the day-to-day running of the business (Cooper and Robert 1). These details accumulate to make a huge workload that is unnecessary. On the other hand, the conventional systems provide only the required details. The facts that stockholders, as well as creditors, have no interest in knowing the product that generates more profit neither the customers. However, the ABC system can be advantageous over the conventional system because it does not assume any detail hence there are high chances of increasing profitability due to the well-kept inventory (Cugini and Oilonato 127). Another issue raised is the ability of ABC systems to increase the company’s competitiveness. Some of the opponents of ABC systems have argued that ABC systems are not the only solution that faces the business world. The argument has been, there is the need for the systems to be complementary instead of having to compete (Martin 70). He proceeds on to argue that despite the accuracy in costs that comes with the system, the issue that should be addressed to increase the company’s profitability is a change in processes.  Ã‚