THE EVALUATION OF HOW ACTIVITY BASED COSTING CAN BE IMPLEMENTED IN MANUFACTURING COMPANY (CASE STUDY IN SRI ASIH FIRM)

Abstract

Sri Asih Firm is one of the rice company located in Pebayuran, Bekasi. This company produces rice as its main product. The company tries to implement new marketing strategy by increasing the proportion of production for several types of rice. But it seems the company create more cost than it should be. The researcher tries to find the weaknesses in the estimation cost of the company’s production costs related to this problem. This research is focused on how to determining the cost allocation for 4 types of rice which are; Ir, Pera, Pandan Wangi, and Muncul. The researcher uses qualitative method and uses literature review and field research to collect the data and the evidences. There are three types of evidences that the researcher use in field research, which are; inquiries to client, observation, and documentation. Based on the research analysis and evaluation, the researcher found several weaknesses on the calculation and allocation of production cost in Sri Asih Firm. First, the company haven’t allocate the machine cost accurately to each of rice type. Second, the electricity cost between the factory and the owner’s house are integrated which make the electricity cost for production unidentified. And third, the company haven’t allocate the labor cost accurately. To overcome all of the weaknesses regarding the calculation and allocation of production cost by using activity based costing, the researcher has proposed several recommendation to the company. First, change the cost driver of machine cost allocation from the amount of unit output into the machine hour. Second, install another kWh meter for the factory. Third, implement the specialization of work. But due to company’s condition, it is also recommended for the company to use the previous costing method but with some improvement if the company wants to have an accurate costing method with less cost.