The author describes the what, why, and how of a manufacturing strategy called activity based costing (ABC). The benefits of implementing ABC management systems include: it aids in identifying and eliminating non-value added activities; it aids in changing cost-cutting behavior; it promotes designers to consider factory activity costs in their designs; it assists product managers and manufacturing managers in determining the state-of-the-art product costs; it aids manufacturing support managers in identifying and supporting critical process needs; and it supports business unit costing and financial reporting needs. A summary of the lessons learned from an interdisciplinary effort in a major telecommunications manufacturing facility is presented.
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