Time -driven activity based costing in manufacturing processes

Abstract

This study was made as an assignment for an industrial case company. The research problem of this study was that the case company did not have an activity based costing –study done before, and were interested about its possibilities to further analyze the cost structure and what different things done in the company cost.

The theoretical framework of the study consisted of different costing theories and methods, such as cost accounting, strategic cost management, traditional activity based costing, time driven activity based costing and kaizen costing. This built a framework for the empirical part of the study by defining what cost accounting is and how differently it can be approached with distinct methods.

The research material was collected by various methods, including interviews of key persons and production employees, record keeping of activity time consumption, cost data of the case company and timing of individual activities. Some of the interviews were participatory, and the information gathered from them was analyzed qualitatively.

On the basis of the data collected, the time driven activity based costing model for manufacturing processes was developed. With the model, the cost and capacity structure of the manufacturing processes could be viewed and analyzed in more detail than previously. With the data provided by the model, numerous areas of improvement were spotted and given suggestions in regard of potential cost reductions and activity enhancements.