THE USE OF ACTIVITY-BASED COSTING

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1995 ASME Advances in Design Automation Conference, Boston, Massachusetts, Sept. 17-20, 1995.

THE USE OF ACTIVITY-BASED COSTING, UNCERTAINTY, AND DISASSEMBLY ACTION CHARTS IN DEMANUFACTURE COST ASSESSMENTS

Bert Bras and Jan Emblemsvåg The Systems Realization Laboratory The George W. Woodruff School of Mechanical Engineering Georgia Institute of Technology Atlanta, Georgia 30332-0405

ABSTRACT In this paper, the development of an Activity-based Cost (ABC) model is presented for use in design for demanufacture under the presence of uncertainty. Demanufacture is defined as the process opposite to manufacturing involved in recycling materials and product components after a product has been taken back by a company. The crux in developing an ABC model is to identify the activities that will be present in the demanufacturing process of a product, and afterwards assign reliable cost drivers and associated consumption intensities to the activities. Uncertainty distributions are assigned to the numbers used in the calculations, representing the inherent uncertainty in the model. The effect of the uncertainty on the cost and model behavior are found by employing a numerical simulation technique - the Monte Carlo simulation technique. The additional use of disassembly action charts allows the influence of the uncertainty to be traced through the cost model to specific demanufacture process and product design parameters. OUR FRAME OF REFERENCE The growing importance of including environmental issues in design has amplified the impetus for companies to more formally consider the entire life-cycle of a product, from cradle to grave or even to reincarnation through recycling and reuse. A crucial issue is the assessment of costs (or profit) related to pursuing environmentally benign products and processes. We believe that in order to provide efficient and effective decision support in life-cycle design, costing methods should: 1) Assess and trace costs and revenues; 2) Handle both overhead and direct costs; 3) Handle uncertainty; 4) Provide decision support for the process of designing. Attempts to generate formal and systematic design approaches which include environmental considerations, as well as economical, mechanical and other design considerations run aground when confronted with the need to quantify environmental

properties and requirements [1]. Some hurdles to developing environmental impact and cost models are: a) there is a lack of both hard test data and past experience, b) new and different technologies are integrated with unknown effects, and c) designs are incomplete and evolving at the stage where the largest reduction in environmental impact and cost can be made. In addition, the world’ environmental processing capabilities are s largely uncertain. Hence, the following two questions still remain largely unanswered: • What is the cost associated with pursuing environmentally benign products and processes? • Which aspects of both the product and process design have the largest influence on these costs? In this paper, we present a method for developing cost models which aid designers in answering these and similar questions in the context of designing for the life-cycle. The core of our method is the combined use of Activity-Based Costing and uncertainty. Several costing approaches have appeared in the literature in the context of designing environmentally benign products and processes. However, when it comes to assessing costs to lifecycle and ecological issues, Activity-Based Costing (ABC) is gaining ground rapidly on conventional costing systems [2-5] . Based on our review of relevant life-cycle costing approaches, we believe that emerging Activity-Based Costing approach has the best potential for efficient and effective cost assessments in the context of designing for the life-cycle [6] . In this paper, we extend the work presented in [6] by including the following issues: • The uncertainty associated with the...
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