PRODUCT COST INFORMATION SYSTEM SUPPORTER USING ACTIVITY-BASED COSTING IN MANUFACTURING COMPANY

• Main Author: TANUBRATA (NIM 23505034), MARKUS
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/8536
• Institution: Institut Teknologi Bandung

Product cost is very important information as a basic for managerial decision making in a manufacturing company. Decision to determine selling price and product mix are critical and strategic for an organization in response to market competition. Product cost which has some strategic value in company draws implication that this cost must be measured, calculated, and determined confidently and accurately. <br /> <br /> <br /> Product cost is measured and calculated through cost accounting system. Most companies are still using traditional product costing system concept, actually designed for inventory valuation in financial accounting system. This concept is simple and easy to implement, bearing in mind that the financial accounting system is mandatory in every company, required by law. Hence, data from this system is already available, but is not adequate for product costing under management accounting needs. Traditional product costing system has limitations in calculating indirect costs applied to product. <br /> <br /> <br /> Activity-Based Costing (ABC) is a costing concept in management accounting based on business activities in organization, which can be implemented to calculate more accurate product cost. Product is a result of business activities and those activities require resources, which means that costs are incurred. Product cost linked to relevant business activities and then to corresponding resources consumed. This provides more accurate product costing compared to the traditional concept. ABC is better to be implemented in a company which produces more than one type of product and has significant indirect cost components. <br /> <br /> <br /> This study is performed on a manufacturing company and has an objective to create product costing system concept using Activity-Based Costing. The system concept can be implemented to generate product costs information to support the strategic managerial decision, that is, to determine selling price and product mix. Each business activity cost can also be made available to be calculated so that the information can be used to support managerial actions in performing business process efficiency improvement. <br /> <br /> <br /> Analysis performed on 'as-is' condition in the company which implemented traditional costing system to calculate its product cost. Collected data from interview and <br /> <br /> <br /> observation are then manipulated to develop Activity-Based Costing system concept as 'to-be' condition which is suggested to be implemented to calculate product and activity cost required to support product cost information system necessary for managerial decision making. <br /> <br /> <br /> This study discovered that the traditional product costing system produces inaccurate product cost which potentially leads to biased information for managerial decision making. Activity-Based Costing concept designed for a company links product to specific business activities, then to appropriate resources consumed by those activities, providing more accurate product costing. <br />