The comparison of traditional and activity-based costing systems from the perspective of cost-volume-profit analysis for production and profit planning and a trial of activity-based model

ABSTRACT THE COMPARISON OF TRADITIONAL AND ACTIVITY-BASED COSTING SYSTEMS FROM THE PERSPECTIVE OF COST-VOLUME-PROFIT ANALYSIS FOR PRODUCTION AND PROFIT PLANNING AND A TRIAL OF ACTIVITY-BASED MODEL İlhan D ALCI Ph.D.Thesis, Business Department Advisor: Assoc.Prof.Dr. Veyis Naci Tanış September 2004, 222 Pages This study first analyses traditional cost-volume-profit analysis. In doing so, the use of cost-volume-profit analysis for profit and production planning has been identified. In other words, it has been explained how to calculate the number of units that should be produced and amount of sales that should be attained in order to reach the break-even point. In this case, cost-volume-profit analysis for both single and multiple products have been explained. Then a new model, which is named activity-based break-even model, has been developed to use as an alternative to traditional break-even model in automated production environments. In addition, this study attempted to demonstrate with the help of several examples that, activity- based break-even model may produce more concrete results when compared to traditional break-even model. It is shown on a hypothetical factory setting that an Activity-Based Break-Even Model may provide more realistic results than a Traditional Break-Even Model does. Keywords: Activity-based Costing; CVP analysis; Break-even Analysis; IV