Essay about A Tool for Manufacturing Excellence

4986 Words Dec 5th, 2013 20 Pages
Activity-Based Costing: A Tool for Manufacturing Excellence
ABC is a strategic weaoon in the Quest for comoetitive oosition.

By Peter B.B. Turney, Ph.D.

This article exammes rne role of actiVity-based costing in the achievement of manufacturing excellence. It describes manufacturing excellence and the product cost information requirements of managers who seek to achieve it. It shows how conventional product costing fails to meet these needs, and demonstrates how activity-based costing corrects these deficiencies. It explains how managers in manufacturing companies can use activitybased costing for strategic, product design, and continuous improvement purposes. Finally, the article lays to rest fears that activity-based costing may
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ABC traces costs to products according to the activities performea on them. The result is accurate cost information for three purposes: focusing manufacturing strategy, designing prodUCts to increase customer value, and continuously improving operating activities throughout the manufacturing organization.

A manufacturing company that implements a successful program of continuous improvement sees a simultaneous change in key operating characteristics.
The recent emergence of ABC timely because rapid technological change and global competition have increased the need for accurate cost information. At the same time, declines in the cost of processing and capturing data have reduced the cost of building new systems.
IS

What is Manufacturing Excellence? Manufacturing excellence is the deliberate and continuous improvement of all activities within a manufacturing company with the goal of achieving a competitive advantage. This continuous improvement takes place within the framework of a competitive strategy that uses market, environment, and technical opportunities to achieve a favorable competitive position in an industry. Manufacturing excellence requires success in three broad types of activity. First, managers must select and implement strategies based on an understanding of the relative profitability of those strategies. Second, products must be designed to profitably meet the needs of customers identified by the chosen strategies, and to

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