Activity-based costing as a method for assessing the economics of modularization: a case study and beyond

Jesper Thyssen, Poul Israelsen, Brian Jørgensen

    Research output: Contribution to journalJournal articleResearchpeer-review

    50 Citations (Scopus)

    Abstract

    The paper accounts for an Activity-Based Costing (ABC) analysis supporting decision-making concerning product modularity. The ABC analysis carried out is communicated to decision-makers by telling how much higher the variable cost of the multi-purpose module can be compared to the average variable cost for the product-unique modules that it substitutes to break even in total cost. The analysis provides the platform for stating three general rules of cost efficiency of modularization, which in combination identify the highest profit potential of product modularization. Finally the analysis points to problems of using ABC in costing modularity, i.e. handling of R&D costs and identification of product profitability upon an enhanced modularization.
    Original languageEnglish
    JournalInternational Journal of Production Economics
    Volume103
    Issue number1
    Pages (from-to)252-270
    Number of pages19
    ISSN0925-5273
    DOIs
    Publication statusPublished - 1 Sep 2006

    Keywords

    • Activity-based costing
    • Modularization
    • Commonality
    • Product costing
    • Case study

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