This paper considers how object costing can be incorporated into business process simulation models for decision support. Conventional and activity-based costing (ABC) methods are assessed in order to determine their suitability for business process simulation and decision support. An extension of ABC is proposed, in which costs are divided between resources rather than activities, and cost allocation rates are refreshed after each event so that emergent changes are taken into account. An application built into a simulation model of a UK SME is presented and illustrated through the evaluation of downsizing a sales department.
DewhurstF. W.BarberK. D.RogersJ. B.Towards integrated manufacturing planning with common tool and information sets. Int. J. Ops and Prod. Mgmt, 2001, 21(7), 1460–1481.
2.
DewhurstF. W.BarberK. D.PritchardM. C.In search of a general enterprise model. Mgmt Decision, 2002, 40(5), 418–427.
3.
BarberK. D.DewhurstF. W.BurnsB.RogersJ.Business process modelling and simulation for manufacturing management: A practical way forward. Business Proc. Mgmt J., 2003, 9(4), 527–542.
4.
VernadatF. B.Enterprise modeling and integration, 1996 (Chapman & Hall).
5.
HvolbyH. H.ThorstensonA.Performance measurement in small and medium-sized enterprises. In Proceedings of the Third Conference on Stimulating manufacturing excellence in small and medium enterprises (Eds FoxT. B.SteepleD.), Coventry, UK, April, 2000.
6.
OtleyD.Accounting performance measurement: A review of its purposes and practices. Int. J. Business Performance Mgmt, 2001, 3(2), 245–260.
7.
HorngrenC. T.FosterG.DatarS. M.Cost accounting: A managerial emphasis, 2000 (Prentice-Hall).
8.
InnesJ.MitchellF.A practical guide to activity based costing, 1998 (Kogan & Page).
9.
NoreenE.Conditions under which activity-based cost systems provide relevant costs. J. Mgmt Acctg Res., Fall 1991, 159–168.
10.
ErraguntlaM.Using smartABC for integrating activity based costing with activity modeling. Knowledge Based Systems Inc., 1998, www.kbsi.com
11.
GagneM. L.DiscenzaR.Accurate product costing in a JIT environment. Int. J. Purchasing and Mater. Mgmt, Fall 1992, 28(4), 28–31.
12.
JonesR. B.Activity based cost management. In DruryC., Management accounting handbook, 2nd edition, pp. 106–132 (Butterworth Heinemann), 1996.
13.
SteelsA.Development of a business activity model with an implementation methodology. PhD Thesis, UMIST, 1995.
La LondeB. J.PohlenT. L.Implementing activity-based costing (ABC) in logistics. J. Business Logistics, 1994, 15(2), 1–24.
17.
StapletonD.SanghamitaP.BeachE.JulmanichP.Activity based costing for logistics and marketing. Business Process Mgmt J., 2004, 10(5), 584–597.
18.
PiperJ. A.WalleyP.Testing ABC Logic. Mgmt Acctg (UK), September 1990, 37–42.
19.
SpeddingT. A.SunG. Q.Application of discrete event simulation to the activity based costing of manufacturing systems. Int. J. Prod. Econ., 1999, 58(3), 289–301.
20.
RasmussenR. R.SavoryP. A.WilliamsR. E.Integrating simulation with activity based management to evaluate manufacturing cell part sequencing. Computers and Ind. Engng, 1999, 37(4), 757–768.
21.
LeeT. R.KaoJ. S.Application of simulation technique to activity based costing of agricultural systems: A case study. Agric. Syst., 2001, 67(2), 71–82.
22.
PritchardM. C.General enterprise models as the core of a strategic decision support system. Eng D Thesis, UMIST, 2002.
