Activity-Based Costing (ABC) assists in allocating overhead costs within a complex process

In early 1999 managers at Alcoa Inc.'s metal-forging plant in Cleveland foresaw a downturn in the aviation sector, one of its key markets. The need therefore arose to figure out which of their aircraft products were most profitable. However, it was hard to determine which lines incurred the highest fixed overhead costs because of the plant’s complex processes, varied output, and long product cycle. Alcoa used ABC via a software package developed by Hyperion Solutions to perform self-study over...

BPIR Categories

11.6.3 Manage facilities
14.1.1 Design & deploy performance measurement system
11.1.2 Manage resource allocation
5.5.3 Improve process/product performance
5.3.1 Develop & adjust production delivery process
11.3.2 Provide internal financial information