Using ABC to support continuous improvement

Article Abstract:

The National Semiconductor Corp (NSC) adopted activity-based costing (ABC) in 1991 so that its plants around the world could improve their reported product costs and obtain the kind of information that could direct their improvement efforts. NSC employed an ABC model containing the dimensions of cost view and process view. Using micro and macro activities is an essential part of developing such a two-dimensional ABC model. Micro activities, or the detailed tasks, are a component of the process view while macro activities, or the summary of tasks, are a component of the cost view. The two-dimensional ABC model is superior to tradional ABC models because it provides support to both product costing and performance improvement. The processes involved in designing such a model are described.

Semiconductors and related devices, Computer peripheral equipment, not elsewhere classified, Semiconductor industry, Accounting and auditing, National Semiconductor Corp.

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Triple-threat strategy

Article Abstract:

Activity-based accounting (ABC), direct costing, and the contribution margin approach, can be combined to give an overview of companies' true costs. ABC is useful in the planning and budgeting stages as a guide to strategic decisions. The usage of ABC does not, however, preclude the value of the contribution approach and incremental analysis for day-to-day decisions. Direct costing, on the other hand, provides a less cumbersome method for continuous product costing and external financial reporting and eliminates the possibility of income manipulation by altering production schedules.

Accounting, auditing, & bookkeeping, Usage, Direct costing

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