Next, tanaka describes toyota’s control structure, which is a matrix of vertical job-specific units and horizontal function–specific controls one of the main function-specific controls is cost control and is comprised of target costing and kaizen budgeting functions. Activity based costing is an approach for allocating overhead costs an activity is an event that incurs costs a cost driver is any factor or activity that has a direct cause and effect relationship with the resources consumed.
Advantages of activity based costing system : activity based costing system has the following main advantages / benefits: more accurate costing of products/services, customers, skus. Activity-based costing activity-based costing activity based costing (abc) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity.
Activity based costing activity based costing company overview one of the largest manufacturers in the auto industry with the annual sales of 74 million units in the five continents of the world is the toyota motors. Activity based costing allocate the overhead expenses based onactivities performed and that's why it is an accurate way toallocate overhead expenses while in absorption costin g, overheadsare. Target costing and activity based costing target costing target costing is the process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure.
It would help to start with the activity-based costing database that caterpillar has constructed over many years that details for every component, assembly and finished good its total cost structure, from variable to “periodic” (fixed) to other overhead elements, by specific sourcing or manufacturing location.
Toyota- accounting practices 1 rida talpur mba 01560 2 introduction activity based costing objective of abc toyota and abc relationship between target costing and abc cvp analysis budget process conclusion recommendation.
Although, the costing system that toyota is adopting, is activity based costing and but there main focus is on target coasting but target costing is related to the activity-based costing on three points (horvath,1993, s12-13).