Product costing for complex manufacturing systems

Activity-based costing (ABC) is one of the latest models in cost accounting. The merits of which have been well discussed in management literature. ABC is primarily aimed at enlarging the range of cost drivers in product costing in order to broaden the scope of activities for which the cost can be causally linked to products. The identification of cause-and-effect relationships between supporting activities and manufacturing characteristics (so called cost drivers) opens up possibilities for "activity-based planning". Unfortunately there have been few attempts to integrate medium-term planning and product costing in a complex manufacturing setting. In this article, an attempt is made to join the benefits of ABC with a more realistic model of complex manufacturing processes in order to create a managerial support system which enables to monitor manufacturing performance more closely. (C) 1998 Elsevier Science B.V. All rights reserved.