It can be seen from the table above that the allocation overhead by using ABC

has a variety of cost driver than the standard cost. With the same total overhead
can produce overhead allocations that vary by driver costnya.
JDCW ABC should use in determining the costs / unit because JDCW have a
diversity of products produced and every product consumes different overhead.
Therefore, when using standard costing the overhead allocation results become
inaccurate. The resulting accuracy of the ABC system will reflect the actual
activities that occur in making a product.
While using the old system, standard cost system, create a particularly bad
effect on the allocation of the price per unit that becomes inaccurate.
Inaccuracies impact on cost per unit that does not fit. There are parts that are
set too low (under costs) and some parts are set too high (over costs).

Things Influenced After Implementation ABC

Frank Stevenson summarizes the results obtained Gear and Special Products
division in implementing Activity Based Costing:

William Keith and Nick Vintila have tried to apply the ABC in the 44 sample JDWC
components and compare them with the costs generated by a standard costing
system. They also experimented with changing the lot size currently used in the
MRP system. In particular, the ABC Model recommend them to double the
average lot size in order to optimize manufacturing costs. Subsequent research
showed the strong influence of the shift in the product mix (product mix) to
streamline the use of turning machine.
Division Changes
During the years 1985 - 1986, the division experienced JDWC restrictions into 5
product lines of business: gears and shafts, machined parts, cast iron making,
heat treating, and sheet metal work. As far as possible be reorganized
department of cell and process until adoption of the approach maufaktur Just - In
- Time to shorten lead times, improve quality, and also lower the cost

ABC model used in order to more effectively then made several changes in its
implementation, namely to
1. Offer
ABC is used to calculate the cost of the machine and prepare an offer for Deere
or customers from outside. Using the ABC company knows which products the
cost is high in the low-volume.

And the division also should change the bidding system in their transfer pricing
practices. And begin to negotiate for "market-based-price" which is under the full
cost
2. Process Planning
Part engineering process using a model comparison of the relative efficiency of
the engine for different types of steel and part number to select which parts are
processed according to the type of engine, because the ABC show setup and
production costs are higher than the MRP. Process engineering using ABC to
calculate costs on the basis of optimal run / year and can be negotiated for the
customer to run a smaller receives at a cheaper price

3. Low Value-Added Parts

Gear and special products accelerate the displacement of low-volume, shortrunning part of the turning machine. Approximately 31% part requires more than
20 hours of direct labor; overall calculated 97% of all direct labor is left to the
engine. But the part that less than 8 hours will be outsourced. By coincidence,
the remaining part is still undetermined, but keputusanyang made based on
more accurate costing ABC.
The combination of displacement LVA part is expected to increase the average
run time, reduce the complexity of scheduling and reduce the demand for
support staff.
4. Cell Arrangements
Plant infrastructure changed from the system into a machine row per-cell system.
Some machines are grouped together and used for high-run part.
5. Layout
ABC also assists management in regulating the machining department.
Secondary operations which have a high cost caused management to restore
menjad previous division and return to the building before being transferred. To
get a bigger place, turning machine that is not efficient anymore discarded. Then
to minimize the distance between barstock handling with packaging and
shipping, these activities are made to be closer to be more efficient. But
unfortunately the new layout has not been tested during the production process
due to the new set during the month of August 1986, while in January 1987 the
plant was closed. However there is a change in the layout that has been applied
in 1985 and made a significant change. Layout which was successfully
implemented during the year is the process engineering group. Initially, process
engineering group is located away from the sales floor but right now in the
middle of the machining area. As a result of the transfer of communication
between personnel of this layout becomes easier.

From a comparison on 44 samples above, obtained results that vary from the
beginning when using standard costing and using ABC, there are cost becomes
smaller and becomes larger. However, the advantages of using the ABC method
is the cost incurred are the actual costs and more accurate. Thus avoiding
overcosting or undercosting and companies can compete with other vendors with
pricing based on actual costs, although there are some goods become higher
costnya, many other goods are also lower costnya. At the moment it is possible
to use standard costing happen overcosting and undercosting so profit margins
obtained was not actual. The above table also shows that the purpose of the use
of the ABC method is not to get a smaller fee, but to get ceminan actual cost.

Future of ABC
Although ABC is very useful, but the benefits are still limited to:
1. ABC only runs on each individual computer, not on a computer that is
integrated with a data base of division
2. ABC is only used for turning machine operating receipts