Activity-based costing approach: Application in a rubber business

Factors such as increasing technology intensity in production, changing conditions and the rising competitive environment have caused the traditional perspective on cost calculations to change. Due to increasing competition conditions, businesses have tended to continue their existence rather than protecting their market shares. Therefore, it is necessary to reduce manufacturing costs and determine costs correctly. Hence, traditional costing approaches are insufficient in determining all aspects of costs. Hence, among the different costing approaches is developed the Activity Based Costing (ABC) method, developed by Cooper and Kaplan, which involves calculating the costs of all activities within the business and assigning them on the product. According to this method, products or services consume activities, and activities consume resources. ABC is an approach that helps directly relate the costs of activities performed in the business to products and customers. In this context, the productions made in the Material Inventory Storage, Mixing, Pressing, Demolding, Cooling, Palletizing, Packaging and Shipment departments of a rubber enterprise operating in Ankara were assigned to the activity departments to determine the costs more accurately, and the change in costs were emphasized. The difference between the traditional costing approach and the activity based costing approach in business was revealed, the results were discussed and suggestions were presented. According to the results of the research, it was concluded that the unit cost of product number 5 produced in the enterprise was lower than the traditional method, and the total cost and unit costs of all other products were higher than the traditional method.