Activity-based costing in flexible manufacturing systems with a case study in a forging industry

The objective of this paper is to apply the activity-based costing (ABC) approach together with traditional costing (TC) for parts costing in flexible manufacturing systems (FMS) with the A(2) level of automation. We propose a new model for the implementation of ABC using the product cost tree concept. First, the required resources and activities for each part are recorded, and then their costs are calculated using the appropriate cost formulae. This model was applied in a forging industry. A comparison and analysis between ABC and TC was then carried out based on the computational results obtained from the case study. The results indicate that the ABC outputs are more reliable than the TC outputs, and thus the ABC approach is a more acceptable tool for parts costing in FMS.