DEVELOPMENT OF ACTIVITY-BASED COSTING IN FABRICATION COMPANY: A CASE STUDY

Authors

  • Jafri Mohd Rohani Faculty of Mechanical Engineering, Universiti Teknologi Malaysia, 81310 UTM Johor Bahru MALAYSIA
  • Nur Alifah Azman Faculty of Mechanical Engineering, Universiti Teknologi Malaysia, 81310 UTM Johor Bahru MALAYSIA
  • Mohammad Hazim Zakaria Faculty of Mechanical Engineering, Universiti Teknologi Malaysia, 81310 UTM Johor Bahru MALAYSIA

Keywords:

ABC method, traditional costing method and overhead cost

Abstract

The purpose of this study is to analyze and compare two costing method, namely, Traditional Costing and Activity-based Costing (ABC) costing in a selected manufacturing company. ABC is better, more accurate way of allocating overhead cost. Several steps such as identify the cost object, identify the direct costs associated with the cost object, identify overhead costs, select the cost allocation base for assigning overhead costs to the cost object and develop the overhead rate per unit. A case study was conducted to compare the benefits, advantages and disadvantages of both costing method. Step by step calculation for both traditional and ABC method was analyzed by choosing three selected products from the case study. The products selected were based from low, medium and high range of its product value. The overhead cost performance for three products were determined using ABC costing and the results were compared with traditional costing method. It was discovered that ABC method is better and more accurate in term of overhead costs.

References

Alnestig, P. and Segerstedt, A. (1996). Product costing in ten Swedish manufacturing companies. International Journal of Production Economics, 46(7), pp. 441-457.

Baxendale, S.J. (2001). Activity-Based Casting for the Small Business: A Primer. Business Horizons. January-February.

Cokins, G. (1996) Activity-Based Cost Management Making it Work: A Manager’s Guide to Implementing and Sustaining an Effective ABC System, Irwin Professional, Burr Ridge, IL.

Cooper, R. (1990). Implementing an activity-based cost system, Journal of Cost Management, Spring, pp.33-42

Cooper, R and Kaplan, R.S. (1991), The Design of Cost Management System, Prentice Hall International, London.

Gunasekaran, A. and Singh, D. (1999), Design of Activity-based Costing In a Small Company: A Case Study, Computers & Industrial Engineering, 37, pp.413-416

Horngren, C., Foster, G., and Datar, S., (1999), Cost Accounting, 10th Ed., Prentice Hall, Upper Saddle River, NJ.

Miller, J. (1996), Implementing Activity –Based Management in Daily Operations, John Wiley, New York.

Rezaie, K., Ostadi, B., and Torabi, S.S., (2008), Activity –based costing in flexible manufacturing systems with a case study in a forging industry, International Journal of Production Research, 46(4), pp.1047-1069.

Yong Woo, K, Seungheon, H., Sungwon, S. and Kunhee, C. (2011) A case study of activity based costing in allocating rebar fabrication costs to project, Construction Management and Economics, Vol. 29, no 5, pp. 449-461.

Downloads

Published

2018-04-01

How to Cite

Mohd Rohani, J., Azman, N. A., & Zakaria, M. H. (2018). DEVELOPMENT OF ACTIVITY-BASED COSTING IN FABRICATION COMPANY: A CASE STUDY. Jurnal Mekanikal, 38(2). Retrieved from https://jurnalmekanikal.utm.my/index.php/jurnalmekanikal/article/view/23

Issue

Section

Mechanical

Similar Articles

<< < 9 10 11 12 13 14 15 > >> 

You may also start an advanced similarity search for this article.