An economic evaluation model for advanced manufacturing systems using activity-based costing

A capacity constrained mathematical programming model for cellular manufacturing with exceptional elements

“…These objectives are different than the objectives in this paper, which are purely based on minimizing total costs where costs have been assigned to each activity. When cost-based accounting, which is an accepted practice in manufacturing for activities like quote estimating and schedule optimizations [27], is not available for every activity, the solution procedure presented by Mansouri et al [26] would be an excellent option. Berardi et al [28] compared costs associated with alternative cluster formations using the same numerical example illustrated by Shafer et al [1] and this paper.…”

An expository note on an economic justification of investments in advanced manufacturing systems

“…Narayanan and Sarkar [5] cite that 15%-20% of companies have installed ABC systems and an equal number are considering adopting them for the next 10 years or so. Cooper and Kaplan [19] insist that when a company implements the ABC systems, it has a chance to closely examine its entire operation and performance and enables to exploit ABC product cost information to change the mix of products produced and customers served, causing to pay attention to making profitable products.…”

“…Ioannou and Sullivan [3] developed a two-stage method for justification of investments in material modern material handling systems employing cost information derived by ABC systems with emphasis on the opportunity costs such as waiting and idle costs. Prior to Ioannou and SullivanŠs work, Park and Kim [5] proposed an investment decision model that was developed based on a linear programming approach with ABC cost information provided. The bottom line behind this research is that ABC systems provide a company's managers with accurate cost information to make correct strategic decisions, while TCA systems produce distorted cost information leading the company's managers to make a wrong decision.…”

“…These striking results are absolutely subject to how the manufacturing overhead of a product is distributed. Therefore, it should be noted that the choice of a cost accounting system appropriate for a manufacturing environment plays a critical role in the investment appraisal [3,5,18]. …”

“…Cooper [1] proposed activity-based cost (ABC) systems as the alternative to the TCA systems in the middle of 1980s, which has been considered to adequately reflect the cost behavior occurring under the AMS. Many researchers [2][3][4][5] assert that when managers use different cost information to make an investment decision, they are led to different conclusion about the decision. In this paper, we will revisit the problem and explore how TCA systems distort an investment justification of AMS and ABC systems and lead to a correct investment decision.…”