In order to meet the increasing customer demand, higher sausage production capacity is required. However, losses in production can also increase as per the growing marketing demand. The main objective of this research is to reduce losses in sausage production. The study was carried out at food factory in Saraburi Province, Thailand. Material Flow Cost Accounting (MFCA) was applied to analyze the cost of losses occurred at each step of sausage production process. Throughout the MFCA approach, this study started from: (1) definition of elementary station as quantity center of the whole production process: (2) determination of inputs and outputs for each station: (3) analysis of mass balance for each station (4) conversion of energy use, depreciation, labor requirement, raw material usage, and waste disposal into monetary terms. The study found that sawdust smoking process was the highest significant loss so that it was replaced by the liquid smoking system. Then, System Dynamics was applied for Long term operation analysis.  The result of this study helps the company reduces waste and saves cost more than 150,000 US dollars per year.  

Keywords: Material Flow Cost Accounting, Food Industry, Sausage Production, System Dynamics