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AN APPLICATION OF ACTIVITY BASED COSTING IN THE AIR CONDITIONER MANUFACTURING INDUSTRY

2004; Taylor & Francis; Volume: 49; Issue: 3 Linguagem: Inglês

10.1080/00137910490498933

1547-2701

Heather Nachtmann, Mohammad Hani Al-Rifai,

Quality and Supply Management

AIRCO is a manufacturer of industrial air conditioner units whose management is concerned that their current traditional cost accounting (TCA) system is not accurately representing their product cost behavior. Under certain operating conditions, an activity based costing (ABC) system can provide relevant and accurate indirect cost information that assists in making customer, product, and process improvement decisions. An ABC system was successfully developed for AIRCO that indicated that their products do not consume overhead costs on a volume basis as represented by their current TCA system. Valuable product and process information were obtained. This case study details the development process that was used and the results that were obtained during the ABC analysis.