Title: An innovative application of activity-based costing and management in decision support modelling

Authors: Amir H. Khataie; Akif A. Bulgak; Juan J. Segovia

Addresses: Department of Mechanical and Industrial Engineering, Concordia University, 1515 St. Catherine St. West, Montréal (Québec), H3G 1M8, Canada. ' Department of Mechanical and Industrial Engineering, Concordia University, 1515 St. Catherine St. West, Montréal (Québec), H3G 1M8, Canada. ' John Molson School of Business, Concordia University, 1450 Guy Street, Montréal (Québec), H3G 1M8, Canada

Abstract: The purpose of this article is to introduce a new cost management and decision support model. The current cost monitoring models act as real-time cost calculators rather than as decision support tools. The model presented in this study can monitor and analyse the costs in real-time. This will allow for timely and effective marketing and operations decision-making, e.g., selling price, marketing strategy, cost control, etc. Several studies have proven the capability of activity-based costing and management (ABC/M) in generating detailed and valuable cost information in production or service providing processes. The integration of ABC/M into the model expands its cost assignment and process views. System dynamics (SD) is used as the modelling tool due to its main characteristic, i.e., the integration of qualitative factors and learning loops. As such, the model presented in this paper benefits from SD's main characteristic as well as ABC/M's cross-functional cost structure.

Keywords: decision support systems; DSS; cost management; system dynamics; activity-based costing; ABC; activity-based management; ABM; supply chain management; SCM; modelling; selling price; marketing strategy; cost control.

DOI: 10.1504/IJEME.2011.045432

International Journal of Engineering Management and Economics, 2011 Vol.2 No.4, pp.369 - 392

Published online: 07 Feb 2012 *

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