THE IMPLEMENTATION OF ACTIVITY-BASED COSTING AND ITS IMPACT ON DECISION MAKING IN PT. K

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.