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Article
Publication date: 10 August 2015

Ahmed E. Haroun

The purpose of this paper is to present the use of activity-based costing (ABC) approach as an alternative option to the traditional cost accounting system. The contribution of…

10047

Abstract

Purpose

The purpose of this paper is to present the use of activity-based costing (ABC) approach as an alternative option to the traditional cost accounting system. The contribution of this study is to demonstrate, through a simple example, the application of that costing system in a service (maintenance) industry, i.e. the paper intended to develop a procedure for a cost model that help in calculating any maintenance job cost, to a reasonable degree of accuracy, based on the actual activities performed.

Design/methodology/approach

This research uses a simple example whereby hypothetical activities and cost data of maintaining an injector and a pump, of an internal combustion engine, are used, presented and analyzed based on the use of the developed procedure.

Findings

ABC system provides more accurate cost estimates rather than the traditional “order costing” methods that uses unit-level costs which are variable in relation to change in service volume. Traditional cost methods distort the costs by applying overhead uniformly over different jobs of varied complexities and activities scope. On the other hand, ABC is a useful means to distribute the overhead costs in proportion (fairly) to the actual activities performed in a specific job and, hence, enhance the rationality of decision making, i.e. will not distort the accounting information used for cost reduction, pricing, and evaluation matters. The results obtained from the analysis showed that allocating costs to the maintained injector decreased from $83.55 to $71.95 and, finally, to $67.57 when using the workshop-wide, two-stage and ABC overhead allocation methods, respectively; while that of the pump increased from $298.90 to $340.34 and, finally, to $359.48 when using the same three methods, in the same order, respectively. The result is quite fair when considering the complexity of the fuel pump, in terms of design and maintenance, when compared with the injector. Notice that using volume to allocate overhead costs results in over costing high-volume products, e.g. injectors (simple in terms of design and operation) and under costing low-volume products, e.g. pumps (more complex in terms of design and operation). The paper recommends to use ABC as a more accurate and fair method when charging maintenance job orders based on the analysis of costing two maintained items in the same premise while consuming different overhead resources.

Practical implications

This study attempts to analyze different methods to calculate a specific corrective maintenance job order. It strives to remedy the drawbacks of the traditional overhead costing of a job order when using principles related to the size of service, such as the direct labor cost/hours, as an allocation base. Consequently, the study proposed a new costing method, i.e. application of ABC. The traditional costing approach is considered by many firms as the best costing method. Nevertheless, it allocates overhead cost over job performed uniformly (equally) not differentiating between the complexity of the job and variety of the activities performed, e.g. using the same allocation base for “oil change” and “fuel pump adjustment” activities. So, ABC prevents cost distortions (unfairness) that could not be prevented by traditional cost accounting system. The author believes that the method presented in this paper will provide a useful management tool for costing maintenance jobs based on the appropriate selected activity drivers in maintenance workshops. The method could be applied for costing maintenance activities in maintenance of all industrial sectors.

Originality/value

The use of traditional costing method has proven to be distorted by applying overhead uniformly over different jobs of varied complexities and activities scope. In this paper the authors strive to present an effective costing alternative that outperforms the traditional ones with regard to overhead allocation. The paper aims to find reliable and fair maintenance costing method, i.e. to find out the relationships between maintenance activities and cost drivers. Although, ABC is widely used in manufacturing industry, no application or current research has presented an applicable thorough worked-out example, with the exception, to the author’s knowledge, of one in the aeronautical industry, to implement ABC method in maintenance industry. The importance of using this method comes from the fact that it provides, relatively, accurate and fair maintenance bills that provide customer satisfaction and firm good image. Hence, the paper is relevant in this respect and intended to contribute to the practice of maintenance management.

Details

Journal of Quality in Maintenance Engineering, vol. 21 no. 3
Type: Research Article
ISSN: 1355-2511

Keywords

Article
Publication date: 1 June 2004

Hooshang M. Beheshti

In the era of competitive global environment and technology‐based organizations managers are, more than ever, pressured to find ways to maintain their competitive advantage. In…

9899

Abstract

In the era of competitive global environment and technology‐based organizations managers are, more than ever, pressured to find ways to maintain their competitive advantage. In order to achieve and sustain a competitive advantage, managers must examine the internal processes of their companies. The firm produces products or provide services by performing a set of activities that create value. Increasing the value of these activities can increase the competitive advantage of a firm. There are several methods that have been developed for adding value to the core activities in the firm. One method that is gaining popularity among companies is activity‐based cost management (ABCM). ABCM as a system can provide managers with a strategic view of the activities that are essential to the competitive nature of the enterprise.

Details

Industrial Management & Data Systems, vol. 104 no. 5
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 1 June 2000

Unaiza Sagheer, Amfried A. Kielmann, Zubia Mumtaz and Saqib Shahab

The study sought to determine the direct and indirect costs of hospitalization incurred by the provider and consumer in a public funded tertiary care hospital in Islamabad…

4924

Abstract

The study sought to determine the direct and indirect costs of hospitalization incurred by the provider and consumer in a public funded tertiary care hospital in Islamabad, Pakistan. The cost per hospital bed per day in both medical and mixed specialty wards was determined in terms of infrastructure, manpower, diagnostic investigations, drugs and utilities, and the cost to the hospitalized individual in terms of transport, food, drugs, investigations, and indirect costs such as time and material requirements of relatives or friends resulting from and associated with the hospitalization. The average daily cost per occupied bed to the institution amounted to Rs. 777 (US $ 18.95) per day. The average cost borne by the patient was Rs. 1,071 (US $ 26.10) per day or 58 percent of the total daily cost of a (medical) bed. A disproportionate share of this expense was under specific subheadings, namely purchase of medicines, laboratory services, transportation and food. Study findings confirm that in contrast to stated national policy, stationary health care is not only not free but that the consumer may end up directly paying more than the state for the services she/he receives.

Details

Leadership in Health Services, vol. 13 no. 2
Type: Research Article
ISSN: 1366-0756

Keywords

Article
Publication date: 1 January 1988

Peter Barrar and Terry Sullivan

This article draws from “institutional” labour economics and mainstream industrial relations, but differs from the more usual uses of their ideas in a number of ways. For example…

138

Abstract

This article draws from “institutional” labour economics and mainstream industrial relations, but differs from the more usual uses of their ideas in a number of ways. For example, the observation we make, that wages and prices are “sticky” downwards and that labour markets respond to falls in demand by employment and quantity adjustments, is not new. Similarly, the idea that labour markets are different from “normal” commodity markets is not of recent origin Hence, while Clay and Hicks were making such observations and speculating on the labour relations consequences of them, Keynes was using the concept of wage rigidity (stickiness) as a central building block in his General Theory which dealt with the conditions for macro‐economic equilibrium.

Details

Employee Relations, vol. 10 no. 1
Type: Research Article
ISSN: 0142-5455

Article
Publication date: 5 September 2016

Olasumbo Ayodeji Makinde, Khumbulani Mpofu and Boitumelo Ramatsetse

Reconfigurable vibrating screen (RVS) is an innovative beneficiation machine designed at Tshwane University of Technology, Republic of South Africa (RSA); with adjustable screen…

Abstract

Purpose

Reconfigurable vibrating screen (RVS) is an innovative beneficiation machine designed at Tshwane University of Technology, Republic of South Africa (RSA); with adjustable screen structure to ensure sorting, sizing and screening of varying mineral particles (sizes and quantities) demanded by the customers in a cost-effective manner through the screen structure geometric transformation. In order to ensure that this machine is optimally maintained and managed when utilized in surface and underground mining industries, there is a need to establish or ascertain the best maintenance practices that would be used in optimally managing the RVS machine using decision making techniques. In view of this, the purpose of this paper is to ascertain the best maintenance practices that would be used to optimally maintain and manage the RVS machine when used in surface and underground mines.

Design/methodology/approach

Decision making techniques such as weighted decision matrix (WDM) and analytical hierarchy process (AHP) were used in this research work to establish the best maintenance practice for optimally maintaining and managing the RVS machine using relevant literature survey on maintenance management systems as well as the different maintenance criteria decision indices obtained from different conventional vibrating screen machine manufacturers and maintenance experts.

Findings

Based on the results obtained from the WDM analysis, it was anticipated that e-maintenance (e-M) system embedded with diagnosing and prognosing algorithms; with a cumulative weight score of 2.37 is the best maintenance practice for managing the RVS machine when used in surface mines, while AHP with deeper decision making analysis anticipated that the robotic-driven maintenance (RM) system with an important decision criteria; safety, and a cumulative hierarchy score of 28.6 percent, supported by e-M management system with a cumulative hierarchy score of 17.6 percent are the best maintenance mix that could be used in optimally maintaining and managing the RVS machine, when used in a craggy and hazardous underground mining environment.

Practical implications

To this effect, it could be anticipated that e-M management system (endowed with the ability to detect fault on the machine, diagnose and prognose the different subsystems of the RVS machine and ascertain the reconfiguration time and process of the RVS machine in recovering production loss during the maintenance of the machine as well as meeting customers demand, etc.) is the best maintenance practice for optimally maintaining the RVS machine when utilized in surface mines while both e-M management system and RM management system (endowed with the ability to carry out automated maintenance tasks achievement under little or no maintenance manager intervention) are also anticipated as the best customized maintenance practices mix that could be used in optimally maintaining the RVS machine, when used in dangerous and hazardous underground mining environment.

Originality/value

This maintenance management system evaluation and selection for optimal RVS machine functionality will serve as a useful information to different mining machines (and other related machines) maintenance managers, in selecting the best maintenance management system for ensuring optimal functionality, reliability and maintainability of machines used in their industries.

Details

International Journal of Quality & Reliability Management, vol. 33 no. 8
Type: Research Article
ISSN: 0265-671X

Keywords

Open Access
Article
Publication date: 23 November 2018

Basuki Basuki and Riasty Dewi Irwanda

The purpose of this paper is to simulate the environmental cost reports preparation used to measure environmental performance in realizing eco-efficiency.

15835

Abstract

Purpose

The purpose of this paper is to simulate the environmental cost reports preparation used to measure environmental performance in realizing eco-efficiency.

Design/methodology/approach

This research uses a descriptive case study by using environmental cost detail data from 2011, 2012, 2013 and 2014. The research object is PT Industri Kereta Api (Persero) located in Madiun, East Java.

Findings

The result of the research shows that PT INKA (Persero) has not specifically made environmental cost report. It is found that the percentage of total environmental cost to operational cost tends to increase; the cost which gives the biggest distribution of total environmental cost is the prevention cost. By 2014, the effect of environmental costs on operating costs tended to decrease and during 2012–2014 PT INKA successfully maintained the blue star PROPER and the absence of environmental pollution reports.

Originality/value

PT INKA’s environmental performance is still well controlled and since its inception in 2014 PT INKA has succeeded in realizing the concept of eco-efficiency.

Details

Asian Journal of Accounting Research, vol. 3 no. 2
Type: Research Article
ISSN: 2443-4175

Keywords

Article
Publication date: 29 July 2014

Juan D. Mendoza, Josefa Mula and Francisco Campuzano-Bolarin

The purpose of this paper is to explore different aggregate production planning (APP) strategies (inventory levelling, validation of the workforce and flexible production…

2419

Abstract

Purpose

The purpose of this paper is to explore different aggregate production planning (APP) strategies (inventory levelling, validation of the workforce and flexible production alternatives: overtime and/or outsourcing) by using a system dynamics model in a two-level, multi-product, multi-period manpower intensive supply chain (SC). Therefore, the appropriateness of using systems dynamics as a research method, by focusing on managerial applications, to analyse APP policies is proven. From the combination of systems dynamics and APP, recommendations and action strategies are considered for each scenario to understand how the system performs and to improve decision making on APP in the SC context.

Design/methodology/approach

The research design analyses a typical factory setting with representative parameter settings for five different conventional APP policies – inventory levelling, workforce variation, overtime, outsourcing and a combination of overtime and outsourcing – through deterministic systems dynamics-based simulation. In order to validate the simulation model, the results from published APP models were replicated. Then, optimisation is conducted for this deterministic setting to determine the performance of all these typical policies with optimal parameter settings. Next, a Monte Carlo stochastic simulation is used to assess the robustness of such performances in a variety of demand settings. Different aggregate plans are tested and the effect that events like demand variability and production times have on the SC performance results is analysed.

Findings

The results support the assertion that the greater the demand variability, the higher the flexibility costs (overtime, outsourcing, inventory levelling, and contracts and firings). As greater inter-month oscillations appear, which must be covered with additional alternatives, the optimum number of employees must be determined by analysing the interchanges and marginal costs between capacity oversizing costs (wages, idle time, storage) and the costs to undersize it (penalties for lowering safety stocks, delayed demand, greater use of overtime and outsourcing). Accordingly, controlling the times to avoid increased costs and penalties incurred by delayed demand becomes an essential important task, but one that also depends on the characteristics of this variability.

Practical implications

This paper has developed a modelling approach for APP in a manpower intensive SC by applying system dynamics. It includes a simulation model, the analysis of several scenarios, the impact on performance caused by variability events in the parameters, and some recommendations and action strategies to be subsequently applied. The modelling methodology proposed can be employed to design-specific models for each SC.

Originality/value

This paper proposes an APP system dynamics approach in a two-level, multi-product, multi-period manpower intensive SC for the first time. This model bridges the gap in the literature relating to simulation, specifically system dynamics and its application for APP. The paper also provides a qualitative description of the various pros and cons of each analysed policy and how they can be combined.

Details

International Journal of Operations & Production Management, vol. 34 no. 8
Type: Research Article
ISSN: 0144-3577

Keywords

Article
Publication date: 18 June 2010

Seongsu Kim and Soo Wook Kim

The purpose of this paper is to find if there is an existing trade‐off between service quality and cost when strategies of low‐cost accommodation and uncompromised reduction are…

1073

Abstract

Purpose

The purpose of this paper is to find if there is an existing trade‐off between service quality and cost when strategies of low‐cost accommodation and uncompromised reduction are implemented.

Design/methodology/approach

The model is designed on hand system dynamics, using Vensim™ software. It consists of a situation where no side effects are interrupting the result. The modeled service system is designed as two parts: a situation where five sorts of customer variables are introduced, continued by a situation where low‐cost accommodation and uncompromised reduction change the system.

Findings

There is no typical trade‐off pattern between service quality and cost when implementing Frei's two solutions. Rather, the findings resulted in an almost conform line of quality curve so that the promotion of Frei's solutions can be interpreted as the result of cost reduction.

Research limitations/implications

Owing to the use of simulation tools, it is still critical whether the result holds in the real world where various influences to the service system can exist.

Originality/value

There are various papers regarding service quality and cost but not that much about managerial tools used in a service system. Aside from many statistically proofed papers, this paper uses system dynamics to simulate certain managerial tools for service when implemented into a system.

Details

Asian Journal on Quality, vol. 11 no. 1
Type: Research Article
ISSN: 1598-2688

Keywords

Content available
Article
Publication date: 1 May 1999

114

Abstract

Details

Facilities, vol. 17 no. 5/6
Type: Research Article
ISSN: 0263-2772

Keywords

Article
Publication date: 1 August 1991

Kun‐Huang Yeh and Chao‐Hsien Chu

Under acute global competitive pressure, many companies have viewedproduct diversification as a strategic weapon with which to win marketshares. Nevertheless, product…

Abstract

Under acute global competitive pressure, many companies have viewed product diversification as a strategic weapon with which to win market shares. Nevertheless, product diversification increases costs and sometimes degrades product quality. Many businesses today confront the dilemma of whether to broaden product lines or to focus production. This article explores both theoretically and empirically the possible impacts of product diversification. The emerging technologies and adaptive manufacturing strategies, potentially meeting a variety of customer needs while enhancing other competitive advantages, are examined.

Details

International Journal of Operations & Production Management, vol. 11 no. 8
Type: Research Article
ISSN: 0144-3577

Keywords

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