Track: Operations Management

Abstract

Activity Based Costing (ABC) is an accounting system that collects and analyze all costs related to activities occur in an organization based on their nature. ABC can overcome many of the limitations of Traditional Cost Accounting (TCA) methods as it helps to discover hidden or distorted cost information and remove the generalization of TCA. In this project, Company XYZ is suffering from a major drop in their 2017 sales compared to previous years as new competitors are joining the glass-bottling manufacturing industry in Kuwait. Their sales dropped significantly by 51.35% during the last two years, thus ABC is used to investigate their costing system and try help them know the root causes and overcome this drop. Time and cost information about each step in Company’s XYZ Pepsi glass bottles production line is collected, work stations were analyzed, activities were defined, and cost information were assigned to them. Value Stream Mapping (VSM) is used to analyze and capture all flows of information and materials in the production system and identifies the value and non-value added times and activities. TCA results were compared to ABC and discussed, improvements and recommendations were discovered and presented.