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question 20 an ABC system is one building block of activity - based management (ABM) ....

question 20

an ABC system is one building block of activity - based management (ABM) . the second building block is

1- the ability for managers to understand that the demand for output is central to profitability

2- knowing the limitations of allocating indirect costs

3-automating the costing system

4-that senior management support is crucial

5- understanding the components of indirect cost pools

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Answer #1

Answer : 1- the ability for managers to understand that the demand for output is central to profitability.

Explanation : When a management uses activity based costing information for its decision making than its called activity - based management (ABM) . The ability for managers to understand that the demand for output is central to profitability is regarded as second building block of ABM. It means that managers should produced the products / services as per the of demand their customers.

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