Manufacturing activity based costing

When you are dealing with manufacturing there are a lot of different things that can take place to make sure that you companies makes money. You want to make sure that you make the products that have good quality but you also want to make sure that you don't spend too much on the materials that make good quality. Another thing that manufacturing companies use is manufacturing activity based costing. Depending on you're what type of manufacturing your company is doing will depend on if this is something that is beneficial to your company or not. Here is some information on manufacturing activity based costing that will help you get a better idea if it is right for your manufacturing company.

The first thing to know is what manufacturing activity based costing is. You may also have heard Manufacturing activity based costing referred to as the ABC's. This is the process that managers use to show them useful information on both customers and the overall profitability. It also helps managers to be able to see how to maximize their performance and also help their profit-growth strategies.

The second thing is to know what goes into Manufacturing activities based costing to help get all of the numbers. The first thing is the customers. You want to make sure that you know what type of customers you are manufacturing for. This will help you to be able to identify what type of activities the costumers do and how each one is related to the customer. The reason why you want find out what type of activities relate to each customer is so that you can be able to measure the total cost that is absorbed by those activities. The reason for this is because these are considered to be cost drivers. Cost drivers determine what level of activity each costumer absorbed. The reason for this so that you can use the ABC's and separate each activity into their own cost drivers. Then you will be able to measure the customers participation that is in each specific cost.

The third thing is the cost drivers them selves. Using a cost drive will help you be able to easily see what types of activities have direct and indirect relationships to the cost of doing business and ease of measurement you must have to be able to distribute to each customer the portion attributable to the activities consumed. Drivers can be anything from delivery to telephone expenses, to even design time. Depending on what type of manufacturing you are doing will depend on what drivers are going to be the most useable to you.

These are just a few of the things that you will want to know about manufacturing activity based costing. There are a lot of other things that go into manufacturing activity based costing. You will want to make sure that you do your research so that you know what exactly you need to know about it to make it useful in your company. You may want to go online and see what type of information you can find there. Or there are different conferences along with books and other seminars that you can go to. You may also want to look into asking around and finding out what how other manufacturing companies use it to their advantage. The more research you do the more informed you will be and the more manufacturing activity based costing will help your manufacturing company succeed. You will also want to make sure that before you start using Manufacturing activity based costing in your company that you figure out if the time you are going to spend compiling the information and if the time is worth it.