Presence of a predisposing condition - Predisposing conditions include peptic ulcer disease, acute appendicitis, acute diverticulitis, and inflamed Meckel diverticulum. Indeed, acute appendicitis is still one of the common causes of bowel perforation in elderly patients and is associated with relatively poor outcomes.
(2) Two-Stage Allocation: It can be observed that both the costing systems follow a two stage allocation procedure. In traditional costing, in the first stage, overhead costs are allocated to production departments. But in ABC, in the first stage, overhead costs are assigned to each major activity and not to departments.
The difference between overhead costs and production costs is important to planning and budgeting. Fixed costs are always identified first when creating a budget so a base cost can be established. It is often difficult to cut fixed costs either in overhead or production. Variable costs are the difficulty that causes risk in a company by making budgeting difficult. If budgeting is inaccurate, the company may incur costs that decrease profits.