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It indicated larger lots sizes and fewer runs. The division was therefore able to negotiate with customers to accept fewer runs at lower prices. Another advantage of ABC was that it did not factor depreciation and maintenance into the costs of individual parts as those were deemed to be costs incurred because the factory was running, regardless of volume produced...

The system helped identify low value added parts increased average run time, reduced scheduling complexity and eventually reduced demand for staff support. ABC also helped manager rearrange the machining department.

The existing system could not help managers identify these improvements to operations because it did not allocated overhead costs efficiently across different products...

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