Sally Case
One significant flaw in how overhead costs is allocated by Sally under in the ABC systems is, her application of the 150% for both the internal control and information systems departments. The flaw here is that Sally is kind of using both the ABC and the standard cost system at the same time in determining the charge out rate for the two departments. This will inflate the charge out rate for the internal control consulting, with the information system consulting been reduced, considering the activities performed in the information systems consulting which includes software development, installation, conversion assistance, and training. Yes
The key here is that we would be basing the cost driver rate by actual capacity, not practical capacity so cost issues could still be hidden and there is not incentive to be more efficient. For example, it may turn out they have similar subscriptions or four people have the same subscription and they don’t know. 1/4

D
Since Sally’s company is a service company, activity based costing is ideally suited for her organization. This is because virtually all the cost of her firm is indirect and appears to be fixed. The large component of apparently fixed costs in her firm arises because, unlike manufacturing companies, service companies have virtually no material costs—the prime source of short-term variable costs.
Three ways in which ABC leads to accurate product cost for Sally are outlined below.
Firstly, ABC provides more appropriate means of charging support costs to products. ABC allows managers to attribute cost to activities and products more accurately than traditional cost accounting methods. Yes The activities responsible for cost can be identified and passed on to users only when the service uses the activity. In Sally’s case we are able to calculate the charge out rates for internal control department