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Topic:Using activity-based accounting (ABC) to allocate overhead costs

The questions posed in this week’s Introduction are addressed in Chapter 3, How does an Organization Use Activity-Based Costing to Allocate Overhead Costs?, by describing a number of cost allocation methods including a method called Activity-Based Costing (ABC).

Part 1

Briefly describe the five (5) steps used to implement activity-based costing (ABC). What are the advantages of using ABC? State some disadvantages. You are encouraged to research outside sources and, of course, cite them. Do not, however, quote sources word-for-word, but rather, respond to the Discussion Question in your own words. Minimum words is 250.

Part 2

For this week’s reflection, please write three complete and well composed paragraphs where you describe (using an example, a company that operates in Grenada west indies) what type of overhead cost allocation system you think would best serve their business needs?