Advantages of Activity-Based Costing:

1. Improved Cost Accuracy: ABC provides more accurate product costs by focusing on the specific activities that contribute to overhead, rather than using broad averages.
2. Better Cost Control: By analyzing costs by activity, managers can identify areas where resources are being inefficiently used and focus on cost reduction efforts.
3. Enhanced Decision Making: ABC provides detailed insights into the costs of activities, helping managers make informed decisions about pricing, product mix, and process improvements.

Disadvantages of Activity-Based Costing:

1. Complexity and Cost: Implementing an ABC system can be complex and expensive, requiring significant time and resources for data collection and analysis.
2. Reliability on Estimates: ABC systems often rely on assumptions and estimates about the relationships between activities and costs, which can sometimes lead to inaccuracies if the assumptions are incorrect.