June 26, 2011
June 26, 2011
June 29, 2011
22.1194.1 - 22.1194.11
Implementing Activity Based Costing as an Essential Lean Six-sigma Tool in World-class Manufacturing Enterprises Manufacturing Engineering DivisionAbstract:Most companies are embarking on a path to reduce variation and waste in theirmanufactured products through the adoption of Lean Six-sigma principles. Thefundamental principle of Lean is to only give the customer what they want, and hence itstands to reason that they be rightly charged only for products and services they desireand are ready to pay for. To achieve this, most companies use standard costing as theprevalent method for costing products. This method works fairly well if a company hasonly a few types of products. Today, companies are manufacturing a very wide range ofproducts in terms of technological complexity and customization.Utilizing standard costing in companies where the range of value-added work performedis wide, results in straightforward and simple products being assigned disproportionatelyhigher cost than customized or special products. Companies that do not identify this trendand continue to use standard costing tend to attract customized and special productsaway from their competitors which they have ended up under-costing (and under-pricing),and divert the straightforward easy to manufacture products to competitors which theyhave over-costed (and over-priced). This is a sure recipe for entering a death spiral for amanufacturing business.To avoid this from happening, Lean companies need to adopt Lean accounting which is amethod for costing products based on the concept of activity based costing (ABC). In thispaper, how ABC should be implemented in a manufacturing company along with a casestudy will be presented.
Mehta, M. B. (2011, June), Promoting Awareness in Manufacturing Students of the Need for Simultaneous Implementation of Lean Six-sigma and Activity Based Costing Paper presented at 2011 ASEE Annual Conference & Exposition, Vancouver, BC. https://peer.asee.org/18825
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