ACME estimates that it costs $1.50 per month for each unit of this appliance carried in inventory (estimated by the beginning and ending inventory levels each month). Currently ACME has 120 units in inventory on hand. To maintain a level of workforce, the company wants to produce at least 400 units per month, it also wants to maintain a safety stock of at least 50 units per month. ACME wants to determine how many to manufacture during each of the next 4 months to meet the expected demand at the lowest cost.

Activity-based costing (abc) is not truly a cost collection mechanism as much as it is an inventory valuation method. the main purpose for implementing an activity-based cost system is to try to overcome some of the cost distortions that occur in traditional costing from product differences when there are variations in size and complexity. however, one of the disadvantages of utilizing abc is that the additional information gathering necessary to implement costing with that level of detail might be beyond the reach of some companies with resource or financial constraints. with this in mind, what kinds of industries or companies do you think would benefit most from using activity-based costing and why? in designing or modifying an accounting system to capture appropriate costs for abc, what considerations do you think would need to be made?