1 Center for Industrial Production, The Faculty of Social Sciences, Aalborg University, VBN2 Department of Business and Management, The Faculty of Social Sciences, Aalborg University, VBN3 Aarhus School of Business, Denmark
a case study and beyond
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.
International Journal of Production Economics, 2006, Vol 103, Issue 1, p. 252-270
Activity-based costing; Modularization; Commonality; Product costing; Case study