Activity based costing in manufacturing

Activity based costing in manufacturing

Activity based costing in manufacturing: two case studies on implementation

The Authors

Amrik S. Sohal, Department of Management, Monash University, Australia

Walter W.C. Chung, Department of Manufacturing Engineering, Hong Kong Polytechnic University, Hong Kong

Acknowledgements

The authors are grateful to the Financial Controller at MelCo and to Mr Richard Siu, now Deputy General Manager of Ciba Specialty Chemicals (China) Ltd. They are also thankful to the Hong Kong Government Industry Department and The Hong Kong Polytechnic University (PolyU) for providing the funding to complete this paper and to Jimmy Ho who worked as a Research Assistant/Student on the ABC project at PolyU.

Abstract

This paper presents two case studies ... Show more content on Helpwriting.net ...Slightly over 50 per cent of the respondents had not seriously considered ABC and around one–third were vetting it.

In 1995 the Australian Society of CPAs initiated a major survey on ABC amongst Australian manufacturers. This survey, which was conducted by the University of Technology, Sydney, involved 213 firms covering all aspects of Australian manufacturing (Corrigan, 1996; Wood, 1996). This survey showed that 45 per cent of the surveyed firms had never considered adopting ABC (although 88 per cent of those surveyed acknowledged awareness of activity–based costing), 29 per cent were still in the process of considering adopting it, 14 per cent had considered and rejected it and only 12 per cent of the firms surveyed had actually implemented it. The highest adoption rates of ABC were found amongst the food, beverage and tobacco industry with 25 per cent of this group using this method.

Of those companies which had adopted ABC most had implemented it within one to two years after making their decision to adopt it and the majority of these companies believed that they had achieved five goals: more accurate product costing; better cost management; better cost control; better allocation of overheads; and more accurate cost information.

The Australian survey found that those companies which rejected ABC claimed that the uncertainty of benefits and the high cost relative to perceived benefits were the main

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