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All of these options require a company to properly and accurately measure costs of products and services to determine true profit margins.
Product costs may be measured either based on a traditional cost measurement system or an activity-based cost measurement system. Traditional cost accounting systems exclusively focus on allocation of costs to different products (in some manner, often arbitrary), while Activity-based costing (ABC) involves delving into the cause-effect relationship between activities and costs in the product market process. Obviously, ABC results in a more accurate and more informative picture of the product cost structure...
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