VARIATION IN PRODUCTION VOLUME: THE IMPACT OF USING AN INTEGRATED ABC-AND-EVA SYSTEM TO REDUCE DISTORTIONS IN PRODUCT COSTS

Narcyz Roztocki
Kim LaScola Needy

This paper was presented at the
2000 American Society for Engineering Management (ASEM) National Conference.
October 4 - October 7, 2000, Washington Marriot Hotel, Washington, DC.



PLEASE CITE AS FOLLOWS:
Roztocki, N. and Needy, K. L. "VARIATION IN PRODUCTION VOLUME: THE IMPACT OF USING AN INTEGRATED ABC-AND-EVA SYSTEM TO REDUCE DISTORTIONS IN PRODUCT COSTS," Proceedings of the 2000 American Society for Engineering Management (ASEM) National Conference, Washington, DC, October 4 - October 7, 2000, pp.341-346.

ABSTRACT:

This paper examines the impact of variation in production volume on product cost, as estimated by three different costing systems. Production volumes were categorized as being small, medium or large. A Traditional (volume based) Cost Accounting System (TCA), an Activity-Based Costing System (ABC), and an Integrated Activity-Based Costing and Economic Value Added System (Integrated ABC-and-EVA) were compared. This comparison is illustrated using data from a field study performed at a small manufacturing plant which designed and produced precision custom injection-molds. During this field study, we developed and implemented the Integrated ABC-and-EVA System. Our results showed that when production volume varies substantially, the Integrated ABC-and-EVA System is more effective in reducing distortions in product cost than a TCA or standard ABC system.

KEYWORDS:

Activity-Based Costing, Costing System, Economic Value Added


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