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Activity-based costing as a method for assessing the economics of modularization - A case study and beyond

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  • Jesper Thyssen, Denmark
  • Poul Israelsen, Denmark
  • Brian Jørgensen, Denmark
  • Accounting Research Centre - ARC
  • Department of Business Studies
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.
Original languageEnglish
JournalInternational Journal of Production Economics
Volume103
Issue1
Pages (from-to)252-270
ISSN0925-5273
DOIs
Publication statusPublished - 2006

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