Application of discrete event simulation to the activity based costing of manufacturing systems

In the last two decades traditional cost accounting practices have been una ble to respond to the changing information needs of manufacturing managemen t. Activity Based Costing (ABC) is a method which can solve many of the lim itations of traditional cost systems. This method of accounting involves th e breaking down of the individual activities and costing of the amount of t ime spent on each step of the manufacture of a product. This paper illustra tes how Discrete Event Simulation may be used to evaluate the ABC of a manu facturing system. A visual interactive simulation software WITNESS is used to model a semi-automated Printed Circuit Board (PCB) assembly line. The PC B assembly line case study demonstrates how ABC can be applied to a manufac turing system using simulation modelling techniques. The paper also discuss es further applications of ABC in the manufacturing environment and include s a case study on the operational quality cost. (C) 1999 Published by Elsev ier Science B.V. All rights reserved.