Why is the activity-based costing not acceptable for external financial reports?

Activity-based costing differs from traditional costing systems in several ways. In activity-based costing, nonmanufacturing as well as manufacturing costs may be assigned to products. Also, some manufacturing costs, including the costs of idle capacity may be excluded from product costs. An activity-based costing system typically includes several activity costs pools, each of which has its unique measure of activity. These measures of activity often differ from the allocation bases used in traditional costing systems.
Question’s: Pleas answer each question’s separately. Short answers.
1. Explain how the activity rates (i.e… cost per activity) for the various activities can be used to target process improvements.
2. Why is the activity-based costing not acceptable for external financial reports?

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