ABC is a powerful tool for decision making. However it has a number of limitations:
1) Implementation requires substantial resources. Its also costly to maintain.
2) ABC produces numbers such as product margins that are different to traditional costing systems. So there are costs associated with training and education.
3) ABC data can be easily misinterpreted and must be used with case when making decisions. Before making significant decisions, costs must be properly analysed.
4) Reports dont confirm with GAAP. Therefore two parallel systems will need to be maintained for external reporting purposes.