The Goodmark Company example also helps us understand when ABC may be useful
for a firm. First, multiple products are needed. ABC offers no increase in product costing
accuracy for a single-product setting. Second, there must be product diversity. If
products consume non-unit-level activities in the same proportion as unit-level activities,
then ABC assignments will be the same as functional-based assignments. Third,
non-unit-level overhead must be a significant percentage of production cost. If it is not,
then it hardly matters how it is assigned. Thus, firms that have plants with multiple
products, high product diversity, and significant non-unit-level overhead are candidates
for an ABC system.