- Development of real-time product cost measurement: A case study in a medium-sized manufacturing company
- International Journal of Production Economics
- Volume | Issue number
- 183 | Part A
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam Business School Research Institute (ABS-RI)
Data availability and the need for updating are important considerations when designing product costing systems. This paper describes the development of a costing system in a medium sized company to better understand these issues. The company wanted to be able to assess profitability of products on a more comprehensive basis than the contribution margins of products, which included merely the direct material costs. The resulting system uses practical capacity to compute rates and is based on a hybrid of machining and labor times. The most innovative aspect is the use of real-time data on machine times in manufacturing, in the context of a large number and frequently changing products. The study also helps to better understand the limitations of time-driven activity-based costing (TDABC), and it highlights the role of “data discovery” for the design of costing systems.
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