Abstract:
PT. K is a small-medium company focusing in knitting industry. Currently,
the company is implementing Traditional Costing method. A new costing system,
which is Activity-Based Costing method (ABC), is going to be implemented. The
aim of this research is to find out a more accurate total cost of the products to
obtain higher profit and to know which products are generating profit and which
products are making a loss, through one of the types of short-term decisionmaking,
which is keep or drop analysis. The result of this research indicates that
by implementing ABC, 3 of the products, such as collar, cuff, and bottom are
supposed to have higher total cost, but because of the implementation of current
costing system, it is lower, which indicates undercosting. However, for rib and toy
sweater, it is overcosted. Moreover, the result of using keep or drop analysis
indicates that by using ABC method, one of the products, which is cuff, is
unprofitable. A recommendation for the company is that it is suggested for the
company to use ABC method as the costing system, since it is more accurate,
more detail and helps the company to make better decision-making.
