ABC Cost Driver Framing and Altering the Balance of Power in Customer-Supplier Negotiations

2022 ◽  
Author(s):  
Linda J Chang

This study examines how activity-based costing (ABC) cost driver framing affects suppliers’ ability to increase their bargaining power when facing powerful customers. Results of an experiment show that suppliers with high potential to contribute to increasing joint profits are able to increase their power and earn a higher share of joint profits than suppliers with low contribution potential. However, providing suppliers with externally framed cost drivers (cost drivers represented as customers’ activities) instead of internally framed cost drivers (cost drivers represented as suppliers’ own activities) reduces their ability to utilize contribution potential as a source of power. Analyses of negotiators’ behavior show that suppliers with high contribution potential and internally framed cost drivers use more integrative tactics to increase joint profits, allowing them to earn higher shares of joint profits. This study shows that the how firms frame cost drivers affects negotiators’ ability to improve joint profits and negotiation power.

2020 ◽  
Vol 4 (2) ◽  
pp. 310-322
Author(s):  
Syamsu Alam

This study aims to trace the absorption of overhead costs in the production process at Sabbena Soppeng's silk house, to identify appropriate cost drivers in allocating overhead costs to products that are accurate and do not occur distortion. This research uses descriptive method. Collecting data through interviews, observation, documentation. The analysis was carried out by applying a two-stage activity-based costing model. First, trace overhad costs to the “cost pool”. Second, trace the overhead costs to the product using multiple cost drivers. The results showed: a) the product category " Kain Sutera" shows a smaller difference of Rp. 3,253.62; b) product category "Sarung sutra ST-0 Standar" shows a bigger difference of Rp 10,997.4; c) product category "Sarung sutera ST-1 Standar" shows a bigger difference of Rp 22,420.49; d) product category "Sarung sutera ST- Sedang" shows a bigger difference of Rp. 28,352.51; e) product category “Sarung Sutera ST-ASL” shows a bigger difference of Rp. 278,342.75. The difference is due to the fact that the traditional overhead system does not use several cost drivers. Meanwhile, the ABC system uses a multi cost driver in charging BOP. So that with the ABC System it is considered that the BOP allocation is more accurate. Keywords : Activity Based Costing, Cost of Production.


2006 ◽  
Vol 45 (04) ◽  
pp. 462-469 ◽  
Author(s):  
S. Toyabe ◽  
S. Kurashima ◽  
M. Okada ◽  
K. Akazawa ◽  
P. Cao

Summary Objectives: Activity-based costing (ABC) is widely used to precisely allocate indirect costs to medical services. In the ABC method, the indirect cost is divided among the medical services in proportion to the volume of “cost drivers”, for example, labor hours and the number of hours of surgery. However, the workload of data collection of cost drivers can be time-consuming and a considerable burden if there are many cost drivers. The authors aim to develop a method for objectively reducing the cost drivers used in the ABC method. Methods: In the ABC method, the cost driver is assigned for each activity. We assume that these activities and cost drivers are the best combination. Our method, that is cost driver reduction (CDR), can objectively select surrogates of the cost drivers for each activity in ABC from candidate cost drivers. Concretely, the total indirect cost of an activity is temporarily allocated to the medical services using each candidate of cost drivers. The difference between the costs calculated by each candidate and the proper cost driver used in ABC is calculated to evaluate the similarity by the evaluation function. Results: We estimated the cost of laboratory tests using our method and revealed that the number of cost drivers could be reduced from seven in the ABC to four. Similarly, the results of cost estimation obtained by our method were as accurate as those calculated using the ABC. Conclusions: Our method provides two advantages compared to the ABC method: 1) it provides results that are as accurate as those of the ABC method, and 2) it is simpler to perform complicated estimation of hospital costs.


2018 ◽  
Vol 7 (2) ◽  
pp. 125
Author(s):  
Agung Listiadi

Cost is an important factor in ensuring the company win in the competition on the market. Consumers will choose a manufacturer that is able to produce products and services that have high quality with low prices. Costs of Management Systems Contemporary emphasis on search than the allocation. And management based activities are at the heart of contemporary operating control system. At least two major factors that must be considered in the selection of cost driver (cost driver) are: the cost of measurement and the degree of correlation between the consumption cost driver with the actual overhead. Cost driver is divided into two categories, namely the structural cost driver and executional cost driver. Cost driver is the basis used to charge collected on cost pool to the product. So that the calculation of the cost through Time Driven activity-based costing system, the company obtain more precise information and accurate.


2013 ◽  
Vol 8 (3) ◽  
Author(s):  
Stephany Ch. Pelleng ◽  
Herman Karamoy ◽  
Victorina Tirajoh

Nowadays, every company has to have a right and efficient way to know their own pricing process. The better the company count it, the better it would be to compete in the market because the right method or system will decrease the cost and increase the profit. Activity Based Costing System is a method of calculating the cost of goods manufactured based on activities in a company using more cost driver, so it can calculate more accurate. This method is expected to be applied to the PT. Sarimelati Kencana who still using the traditional system for calculating the cost of goods manufactured. This research has a purpose to know the cost of goods manufactured in the company using activity based costing system. There are qualitative and quantitative data on this project. Qualitative data for company profile and quantitative data for production costs. This is descriptive research and the result shows that the pricing process using ABC method give overcost condition for pizza hut personal and undercost condition for pizza hut regular and large.


Author(s):  
Jennie M. Moton ◽  
Brian D. James ◽  
Whitney G. Colella

This paper evaluates the potential for electrochemical hydrogen compression systems (EHCs) regarding their engineering performance, manufacturability, and capital costs. EHCs could enhance or replace mechanical hydrogen compressors. The physical embodiment of EHCs is similar to that of low temperature (LT) proton exchange membrane (PEM) fuel cell systems (FCSs). They also share common operating principles with LT PEM FCS and with PEM electrolysis systems. Design for Manufacturing and Assembly (DFMA™) analysis is applied to EHCs to identify manufactured designs, manufacturing methods, projected capital costs under mass-production, and cost drivers for both the EHC stack and the balance of plant (BOP). DFMA™ analysis reveals that EHC stack costs are expected to be roughly equal to EHC BOP costs, under a variety of scenarios. (Total EHC system costs are the sum of stack and BOP costs.) Within the BOP, the primary cost driver is the electrical power supply. Within the stack, the primary cost drivers include the membrane electrode assembly (MEA), the stamped bipolar plates, and the expanded titanium (Ti) cell supports, particularly at lower hydrogen outlet pressures. As outlet pressure rises, capital costs escalate nonlinearly for several reasons. Higher pressure EHCs experience higher mechanical loads, which necessitate using a greater number of smaller diameter cells and a greater tie rod mass. Higher pressure EHCs also exhibit a higher degree of back-diffusion, which necessitates using more cells per system.


Politics ◽  
2018 ◽  
Vol 39 (1) ◽  
pp. 50-63 ◽  
Author(s):  
TV Paul

This article addresses the research question: how have most small states of South Asian region managed to acquire substantial amount of investment from China and India without falling into the strategic orbit of either power? This is an anomaly because most structural theories, in particular neorealism, would expect small states not to have much power and influence on their own in their relationship with powerful states. I answer this puzzle by arguing that the limited competition between China and India in an era of intensified economic globalization has provided a window of opportunity to small states to maximize their returns from the two without upsetting their relationship with either in a big way. This short-term bargaining window has been facilitated by the managed rivalry and economic interdependence between China and India which is yet to become an intense strategic rivalry. The article cautions that as the Chinese and Indian ambitions in the Indo-Pacific collide, the smaller states may be asked to make choices akin to bandwagoning with either one, in particular by offering military bases and naval facilities. This development, if it occurs, will drastically affect the bargaining power of the smaller states.


2020 ◽  
Vol 2020 ◽  
pp. 1-12
Author(s):  
Na Lou ◽  
Jingjuan Guo

The prefabricated building as a major initiative has been put forward by China in recent years to promote the transformation and upgrading of the construction industry, but its rapid development also faces high cost constraints. Therefore, it is necessary and urgent to study the key cost drivers and cost control paths of prefabricated buildings. Most of the current research focuses on the construction cost of prefabricated building as a static object. This article, on the other hand, regards the construction cost of prefabricated building as a dynamic formation process and conducts systematic research from product systems, technical systems, construction processes, and management modes. The influence factors of prefabricated building cost are defined and screened with the help of HSM and previous research results. A cause-and-effect model and cost control model of prefabricated building cost driver are established. Based on the model test of the actual project, the cost generation of prefabricated buildings is simulated. Through sensitivity analysis, key cost drivers of prefabricated building are identified and ranked as degree of design standardization, unit price, prefabrication rate, information technology level, transportation mode, labor level, machinery level, transportation distance, etc. Accordingly, corresponding strategies are proposed for the cost control of prefabricated buildings.


2019 ◽  
Vol 19 (2) ◽  
pp. 165-183
Author(s):  
Aruna Apte ◽  
Corey Arruda ◽  
Austin Clark ◽  
Karen Landale

Purpose In an increasingly budget-constrained environment, the Department of Defense (DoD) must maximize the value of fiscal resources obligated on service contracts. Over half of DoD procurement spending between 2008 and 2012 was obligated on service contracts (GAO, 2013). Many services are common across the enterprise and recurring in nature; however, they are treated as unique and procured individually at the base level, year after year, rather than collectively in accordance with a larger, enterprise-wide category management strategy. The purpose of this paper is to focus on creating a methodology that treats common, recurring service requirements in a more strategic manner. Design/methodology/approach The authors develop a standardized, repeatable methodology that uses relevant cost drivers to analyze service requirements to identify more efficient procurement strategies. Furthermore, they create a clustering continuum to organize services based on proximity between the customer-supplier bases. This paper uses a commercial business mapping software to analyze cost driver data, produce visualizations and illustrate strategic opportunities for category management initiatives. DoD requirements for Integrated Solid Waste Management (ISWM) within the Los Angeles area are evaluated using the software and methodology to demonstrate a model for practical application. Findings The authors find that commercial software can be used to cluster requiring activities needing common, recurring services. This standardized, repeatable method can be applied to any category of services with any number of cost drivers. By identifying optimal requiring activity clusters, procurement agencies can more effectively implement category management strategies for service requirements. Research limitations/implications The initial approach of this paper was to develop a macro-level, one-size-fits-all model to centralize procurement. The authors found this approach inadequate as they tried to group service requirements of wildly differing characteristics. They experienced other significant limiting factors related to data availability and data collection. Social implications Clustering common and recurring DoD service requirements would result in standardized levels of service at all installations. The demand savings from clustering would promote the implementation of best practices for that service requirement across the DoD, which would eliminate non-value-added activities currently performed at some installations, or gold-plating of requirements, which is also likely occurring. Originality/value This paper is the first to use an analytics-based methodology to cluster common, recurring public services. It is the first method that offers a standardized, repeatable approach to implementing category management of service requirements to achieve cost savings.


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