On December 1, a company pays $3,600 for a 36-month insurance policy. After one month, accrual accounting requires $

(100/3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, $

(100/3,600) of insurance expense would be reported at the time of purchase.

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?