Which of the following is a disadvantage of activity-based costing?

Activity-based costing (ABC) is a method that assigns costs to products and services based on the resources they consume. While it offers numerous advantages, it does indeed have some disadvantages that can hinder its practical implementation.

The selected answer highlights a significant challenge associated with ABC: the selection of cost drivers. Choosing the appropriate cost drivers is crucial because if the wrong drivers are selected, the costing information can become distorted, leading to misguided decisions. This complexity arises because identifying and measuring the actual activities that consume resources can be difficult and may require substantial time and effort. As a result, organizations may struggle to achieve accurate and meaningful cost information, which can undermine the effectiveness of ABC as a management tool.

The other options present benefits of activity-based costing, such as providing real-time cost data, improving profitability, and encouraging better decision-making, all of which highlight the method's potential advantages rather than discussing its downsides. These advantages emphasize the value that ABC can deliver but do not address the practical challenges that might arise during its implementation, particularly concerning cost driver selection.