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Procedia CIRP 63 (2017) 14 – 20

The 50th CIRP Conference on Manufacturing Systems

Competitive Price Strategy with Activity-Based Costingġ ̝ġ Case Study of

Bicycle Part Company
Tsung-Yueh Lua, Shu-Li Wangb, Mei-Fang Wuc*,Feng-Tsung Chengd
Tsung-Yueh Lu a, Shu-Li Wan b , Mei-Fang Wuc*, Feng-Tsung Chengd are with the Department of Industry Engineering and Systems Management of Feng Chia
University, #100, Wenhwa Road, Seatwen, Taichung, 40724, Taiwan, R.O.C.

* Mei-Fang Wu. Tel.: +886-955-041-647; fax: +886-4-2451-0240. E-mail address: mfwu@fcu.edu.tw

Abstract

Bicycle parts industry is a highly competitive industry, especially product components often adopt a low price strategy. The case company
losing competitive advantage because of higher list price than other companies in Taiwan. The case company analyzes the manufacturing cost
structure in order to promote the price competitive power.
The case company re-exams the manufacturing process carefully. There are three processing stage for product manufacturing, from raw
materials processed into parts level, assembled parts into components, and assembles components into bicycle finally. The customized product
causes different manufacturing process that will cause multiple resource expired to drive variant cost structure.ġThe complicate cost structure
might affect price strategy to makeįġTherefore this paper explores cost calculation methodology for more accurate cost information than the
traditional volume-based costing (VBC).
The paper uses Activity-Based Costing (ABC) approach with two stages to allocate and calculate the manufacturing cost which is based
on resources expired of process activities. By comparing the cost information between VBC and ABC approach, the research findings indicate
that current VBC approach distorts cost structure because of single cost drive had been chosen, therefore, cross-subsidization among
manufacturing cost structure among variant product. Secondly, ABC approach provides more accurate cost information that will help to set the
competitive price strategy of the product that is great contribution to increase enterprise’s profitability and competitive power. The paper look
forwards to implement Activity-Based Costing approach which the product are variant and manufacturing process are complicate of the
enterprise and industry.
©©2017
2017The
TheAuthors. Published
Authors. by by
Published Elsevier B.V.B.V.
Elsevier This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the scientific committee of The 50th CIRP Conference on Manufacturing Systems.
Peer-review under responsibility of the scientific committee of The 50th CIRP Conference on Manufacturing Systems
Keywords: Volume-Based Costing (VBC); Activity-Based Costing (ABC); Bicycle parts industry, Products Pricing Strategy.
,

1. INTRODUCTION information is cornerstoneġ of strategy management to help

The technology of bicycle industry has been developed for
30 years in Taiwanĭġand beenġnamed global bicycles Kingdom.
The fierce competition global market with low price strategy,
China and Vietnam, leads building oversea production bases
of Taiwan. The rapid progress of technology and skill lead the
synchronous progress of manufacturing process that causes
the usage of automated production equipment widespread. The
labor intensive manufacturing process is changed. The ratio of
cost structure changed into high ratio of manufacturing
overhead and low ratio of direct labor cost. The precise cost
senior manager and owner to make the competitive decision.
2. LITERATURE REVIEW
The literatures includes: bicycle industry, Volume-Based
Costing (VBC), Activity-Based Costing and Management
(ABC/M), and case study.
2.1 Bicycle industry
There are various types of bicycle products, includes road
racing cars, general commuter cars, mountain bike (mountain
bike), folding carts, baby carriages, electric bicycles, and

2212-8271 © 2017 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the scientific committee of The 50th CIRP Conference on Manufacturing Systems
doi:10.1016/j.procir.2017.03.102
 Tsung-Yueh Lu et al. / Procedia CIRP 63 (2017) 14 – 20
other bicycles. The parts and components of bicycle are frame,
flywheel, hub, front fork, seat cushion, chain, pedal, fender,
transmission, asbestos brake, crank gear, seat tube and
handlebar.
The bicycle industry develop to be an export stage with
large number of production in exchange for meager profits
during1970s to 1980s. The mass bicycles manufactured by
Taiwan had throughout the global bike market quickly, and
gained the reputation of bicycles Kingdom. Yet, the vicious
competition, and the motorcycle industry arises that drive
bicycle industry expand the global market with low price
strategyġin domestic in recent year.
2.2 Volume-Based Costing (VBC)
The Volume-Based Costing is developed in the early 19th
century. The main cost with direct labor and direct materials
are high proportion with 80% to 85% of manufacturing costs,
manufacturing overhead is relatively low with 10% to 15% in
VBC system. The most commonly allocate bases for indirect
cost are: volume of products, number of direct labor hours,
cost of direct labor, and the number of machine hours.
Cooper and Kaplan [1] indicate that the Volume-Based
Costing system distorts the product cost due to lack of timing
and causal relationship with resources expiring during
manufacturing process. Zhu Baiwei [2] believes that the
Volume-Based Costing information not be able to provide the
correct relevance for decision planning and controlling. The
cost information is one of important cornerstone of price
strategy to achieve the profitability goals.
2.3 Activity-Based Costing (ABC)
Cooper, Kaplan extended the notion of Activity-Based
Costing (ABC) to academia and the empirical study [1].
Activity-Based Costing is an activity analysis method
developed to understand the indirect support costs of decision
management or operations. ABC model built up as a
single-faceted model initially. The advantage of the costing
system provides the accurate cost information which is based
on the production process and activities [1] [2]. Turney
proposed two-faceted model for three years later [3].
The single-faceted model mainly constructs the causal
relationship between product cost and resource consumption,
and traces back to the cost object according to the cost driver
of the activity [4], and calculates the cost of the
manufacturing or the cost of selling and administration.
The appropriate cost-driver should have: (1) cause and
effect relationship between activity and costs, (2) behavior
impact, (3) measurable, and (4) Predict or explain an
activity’s use of resources [1].
The two-faceted model is composed of two perspectives:
cost allocation and procedure view. The concept of cost
allocation is to extend the concept of the single-faceted model.
As for the procedure view, it is mainly to explore the causal
relationship between resource consumption and activity
performance. Two-faceted model is shown in fig. 1.
Raffish and Turneyġ built-up Activity-Based Management
model in 1991[5]. The model includes Activity-Based Costing
(ABC), and Activity-Based Management (ABM). The ABC
database help to lead the way for enterprises to upraise the
core competency with efficiency and effectiveness.
15
2.4 Case Study Method
Case study is descriptive study describing special issues and
characteristics of the research design, and is qualitative study
also [6]. Focus on a limited number of events, issues and
interrelation. Because of the detail discusses in a small
number of samples, the samples can be used as the main
reference for decision making and judgment. Case study
method will focus on the development of entire process and
causal factors in enterprise operation research. The main
purpose of case study is to manage the various situations,
access the causal factors in detail, or to realize the
cause-effect relationship between each other’s.
Cost Assignment View
Resources
Resources Cost
Allocation
(Resources Cost Driver )
Process
Performance
Cost Driver Activity Measurement
View
Indicators
Activity Cost
Allocation
(Activity Cost Dricer)
Cost Objective
Fig. 1 Two Dimensional Activity-Based Costing Model
The case study researchers examine different problems
which is existed in the case company. They collect, interview,
and observe data with long time period. The differences in
empirical approach lies in the fact that the relevant
information acquired by the researcher is from the objective
observation rather than the subjective participant. Therefore,
case studies are generally considered to be a more objective
way.
3. METHODOLOGY ANDġġRESEARCH FLOW
The implementation process of ABC system is described as
following and is presented in Figure 2.
Step 1 Set up the goals of bicycle parts ABC system
implementation. The bicycle parts industry must
define the main objective of the implementation of
Activity-Based Costing, and then calculate the
accurate product cost.
Step 2 Organize the ABC work team: Team members should
have diverse background and multiple professional
perspectives in different departments of the company.
Step 3 Bicycle parts manufacturing flow analysis: team
members should interview senior managers and
operators for manufacturing process and conversion
activities.
16 Tsung-Yueh Lu et al. / Procedia CIRP 63 (2017) 14 – 20

calculate the cost objectives for parts and products.

Set up the goals of bicycle parts
ABC system implementation
Organize the ABC team work
Bicycle parts manufaf cturingn
f ow analysis
fl
Categorize the activity level
The manufacturing overhead are divided into parts
Allocate the activity cost pool
manufacturing and product assembly separately in
the case company. The in-house parts sector operates
Decide the activity cost driver as an external supply chain model that the first level
and calculate cost driver rate manufacturing cost needs to calculate firstly. The
manufacturing cost of parts will provide the material
Defi
f ne the cost objects cost for second-level assembly manufacturing
process. The cost objectives in this paper are cost of
CNC processing group and assembly group.
Establish the ABC cost
info
f rmation database
Resource Resource Resource Resource
Expire 1 Expire 2 Expire 3 Expire 4
Resource

Select proper resources driver Calculate bicycle parts and Cost

productcost Driver Activity cost Activity cost Activity cost Activity cost
Pool 1 Pool 2 Pool 3 Pool 4

Diff
fference comparision between
VBC and ABC
Activity items Activity items Activity items Activity items
Activity process 1 Process 2 Process 3 Process 4

Cost

Fig. 2 Implementation process of ABC System Driver Activity Driver Activity Driver
Rate 2
Activity Driver
Rate 3
Activity Driver
Rate 4
Rate 1

Step 4 Categorize the activity level: Divide the conversion

activities into five activities categories for unit, batch,
product, customer and facility level which is based Direct Material
Cost
on the frequency of resources consumed. Cost Objectives

Step 5 Select the proper resource drivers: Resource driver Direct Labor
Cost
are the causal factors that cause resources cost occur.
All of the conversion works need to be accomplished Fi Fig. 3 Two Steps Allocation Process of ABC
and a lots of resources must be involved and
Step 11 Difference comparison with VBC and ABC:
expired, managers, indirect labors, facilities, utilities,
Compare the cost difference between VBC and ABC
cause indirect resources cost incurred. These indirect
after calculating the cost objectives with ABC
costs need to allocate to resource pool which is based
database [7]. Explore and explain the reasons for
on resource drivers.
the cost difference, and generating subsequent
Step 6 Calculate the resource pool: Allocates the indirect
impact.
cost to all of the resources pool based on resources
drivers consume. The resources cost pool includes:
4. EMIRICAL STUDY
machine cost, set-up cost, inspection and inventory
cost, research and development cost, and facility cost,
This paper implements the Activity-Based Costing system
and so on. The resource center of in-house parts
by using the case study method, follows the research steps,
sector establish on department or division as an
and compares the cost difference between VBC and ABC
example in this paper.
system finally.
Step 7 Select the proper activity cost driver and calculate the
cost driver rate: The proper cost driver needs to fit to 4.1 Case Company Profile
the manufacturing process, such as inspection times,
The case company was founded in 1982 to produce bicycle
machine hours, set-up times, category of new product,
frames, fork, etc., and most of product is exported to Europe.
and direct labor hours. Calculate activity cost rate by
The company expand the new plant with 4,000 floor in
dividing resources cost with consumption quantities
Taichung on 1999. The company manufactures bicycle frame,
of activity cost drivers.
bicycle rear shock absorbers, shock absorbers fork, carbon
Step 8 Define the cost objectives: The cost objectives could
fiber frame, carbon fiber products,ġand so on. Ŕhock absorber
be bicycle parts or products, customer service or
division is a pilot division in this paper to verify the feasibility
conversion process. The two steps allocation process
of ABC system implementġ in bicycle industry. This paper
of ABC is shown in fig. 3.
calculate and compare the cost difference between VBC and
Step 9 Establish ABC cost information database: Establish
ABC system with empirical studyįġ
the ABC cost information database for insuring that
the cost calculation approach can be applied to any 4.2 Parts and product Profileġ
process of bicycle parts and products industry
The parts and products profile of the shock absorber
feasibly and repeatedly.
division are front fork, seat tube and rear shock absorber.
Step 10 Calculate the cost objectives of bicycle parts and
z Front fork is in front of bicycle structure, and its upper end
products: Applying ABC cost information database to
connected with the handlebar, frame and vertical tube with
 Tsung-Yueh Lu et al. / Procedia CIRP 63 (2017) 14 – 20 17

the bottom. The lower end cooperates with the front axle to
form the guiding system of the bicycle, figuration is shown
in Fig. 4(a).
z Seat post connects the cushion and frame to support the full
weight from the seat cushion, figuration is shown in Fig.
4(b).
z Rear suspension is using the principle of leverage, shock
absorption by the shock absorber. After the installation of
the shock absorber need to add a design of a connecting rod
group, figuration is shown in Fig. 4(c).
unit cost of lathe and milling machine to calculate each annual
total cost, divided by total number of labor hours to get each
second manufacturing overheads for each cluster.
Labor costs per second of CNC machining cluster are
calculated as follows:
ൌ   ሺ—ƒŽ †‹”‡…– Žƒ„‘” …‘•–•ሻȀሺ ™‘”‹‰ †ƒ›• ’‡” ›‡ƒ” ‫›ƒ† ”‡’ •”—‘Š ‰‹”‘™ כ‬
‫͵ כ ‡–ƒ” ‡…ƒ™‘ŽŽƒ כ •”‡”‘™ ˆ‘ ”‡„— כ‬ǡ͸ͲͲሻ
ൌ   ሺ̈́͹ǡ͹ͳͶǡ͸ͳͳ ሻȀሺʹͶͷ ‫ כ‬ͺ ‫Ͳ כ ʹʹ כ‬Ǥͻͷ ‫͵ כ‬ǡ͸ͲͲሻ ൌ ̈́ͲǤͲͷ͵Ȁ •‡…‘†

a b c Total conversion cost of cluster equal to direct labor cost

plus manufacturing overhead.
z 4.3.2 Cost of Product Assembly
The conversion cost calculation steps of assembly division
is similar as CNC machine cluster. The manufacturing
overhead is as follow.
‘–ƒŽ ƒ—ƒŽ ƒ—ˆƒ…–—”‹‰ ‘˜‡”Š‡ƒ†•
 ™‘”‹‰ †ƒ›• ’‡” ›‡ƒ” ‫͵ כ ‡–ƒ” ‡…ƒ™‘ŽŽƒ כ •”‡”‘™ ˆ‘ ”‡„— כ ›ƒ† ”‡’ •”—‘Š ‰‹”‘™ כ‬ǡ͸ͲͲ
̈́ଷହǡ଼଴଺ǡ଴ଵହ
ൌ ൌ ̈́ͲǤʹͳ Ȁ •‡…‘†ġ ġ
ଶସହ‫כ଼כ‬ଶଷ‫כ‬଴Ǥଽହ‫כ‬ଷǡ଺଴଴

Fig. 4. (a) front fork; (b) seat tube; (c) rearġshock.

In addition, the company has a processing cluster for
producing the parts. Parts of suspension parts are
manufactured in-house. The case company has CNC
machines layout with group-style which are divided into 10
clusters in origin. The number 8 cluster removed after broken,
only 9 clusters left currently. The chart of suspension parts
and cluster is presented in Table 1.
4.3 Current Volume-Based Costing System (VBC)
The labor cost of the assembly division is calculated and
shown below.
ƒ‰‡ ”ƒ–‡ ’‡” •‡…‘† ൌ   ሺ—ƒŽ †‹”‡…– Žƒ„‘” …‘•–•ሻȀሺ ™‘”‹‰ †ƒ›• ’‡” ›‡ƒ”
‫‡–ƒ” ‡…ƒ™‘ŽŽƒ כ •”‡”‘™ ˆ‘ ”‡„— כ ›ƒ† ”‡’ •”—‘Š ‰‹”‘™ כ‬
‫͵ כ‬ǡ͸ͲͲሻ
                              ൌ   ̈́͹ǡͻͺͺǡ͵ͷ͸ȀሺʹͶͷ ‫ כ‬ͺ ‫Ͳ כ ͵ʹ כ‬Ǥͻͷ ‫͵ כ‬ǡ͸ͲͲሻ
ൌ ̈́ͲǤͲͷʹ Ȁ •‡…‘†
The annual direct labor cost includes the annual salary
(including 1 month year-end bonuses), the annual labor
insurance, health insurance costs, and the annual meal
subsidiary.

The manufacturing cost categorized into three parts, direct 4.4 Activity Based Costing (ABC)
material costs, direct labor costs, and manufacturing overhead.
The direct materials cost is based on the quotation of suppliers This paper follows 11 process steps of Activity-Based
and quantities expired, direct labor costs is based on wages Costing Implementation for empirical study of case study.
rate and labor hours, and manufacturing overhead allocation Calculate the cost of CNCġ ŮŢŤũŪůŦġ clusters, pilot product of
based on labor hours in current status. front fork, seat tube and rear shock absorber by ABC.
Table 1. The chart of suspension parts and cluster
4.4.1 Define The Goal of ABC system
Cluster Suspension parts The case company is losing cost competitive advantage in
Cluster 1(C1) Rear suspension - bottom connector bicycle parts market. Provide accurate cost information to
Cluster 2(C2) Rear suspension - tubing help case company make appropriate strategy is main goals of
Cluster 3(C3) Rear shock absorber - outer shaft this paper.
Cluster 4(C4) Rear shock - bearing seat Table 2. Sales Quantities and Sales Revenue of pilot products
Cluster 5(C5) Nitrogen tube
Product Name Quantity Unit Price* Sales Revenue*
Cluster 6(C6) Seat pipe - inside and outside the tube Fork F1 7,500 $2,900 $21,750,000
Cluster 7(C7) Front fork - top cover F2 4,000 5,000 20,000,000
Cluster 9(C9) Front fork - shoulder cover F3 3,000 3,100 9,300,000
Cluster 10(C10) Fork - lead block Seat tube P1 16,195 2,256 36,535,920
P2 16,456 1,938 31,891,728
z 4.3.1 Cost of Machine Cluster P3 11,000 2,500 27,500,000
Rear shock R1 35,000 2,000 70,000,000
CNC machine cluster annual total manufacturing cost will
absorber R2 7,500 1,800 13,500,000
share to each cluster in accordance with the number of lathes
R3 11,000 900 9,000,000
and milling machines, 16 lathes and 6 milling, and direct *
Unit: NT $
labor hours. The share ratio of lathe and milling machine is
five to seven, and are, The total cost of lathe equal to annual There are two-stage manufacturing processing through CNC
total manufacturing costs multiple 5/122, and so on. By using machine cluster to assembly of front fork, seat tube and rear
18 Tsung-Yueh Lu et al. / Procedia CIRP 63 (2017) 14 – 20

shock absorber. Each one of CNC cluster manufactures Tableġ3. Activity Pool and Cost Driver Rate
unique part to assembly division in case company. This paper Cost Driverġ
Group Activity Pool Cost Driver
Rateī
choses three pilot products of front fork, seat tube and rear CNC Manufacture Machine Hours $ 163.54
shock absorber by sequencing sales revenue. The pilot Machine Warehousing Material Costs 0.0417
products are shown in Table 2. Cluster Production Number of Work
318.10
Management Sheets
4.4.2 Calculate Activity CostġDriver Rate Purchase Purchasing Cost 0.0253
This process define Activity pool, calculate the resource Quality
Inspection Lot 606.76
cost for CNC machine cluster and assembly division, and Management
calculate and establish activity cost driver rate database.ġThe Research and
Number of Clusters 116,903.28
Development
cost driver and driver rate are listed in Table 3. Assembly Manufacture Labor Hours $ 74.07
4.4.3 Calculate Manufacturing Overhead of Pilot Product Division Warehousing Material Costs 0.0235
The manufacturing overhead is calculated based on the Production Number of Work
1,318.32
Management Sheets
number of cost drivers expired in manufacturing process of
Purchase Purchasing Cost 0.0135
product. The unit manufacturing overhead is obtained by Quality
annual total manufacturing overhead divide by the annual Inspection Lot 2,924.92
Management
output of each CNC machine cluster and pilot product. The Marketing Product Items 119,868.44
manufacturing overhead per unit are shown in Table 4 and Research and
Product Items 179,802.65
Table 5. Development
*
Unit: NT $

Table 4 Manufacturing Overhead Per Unit of CNC Machine Cluster

Production Quality Research and
őroduct Manufacture* Warehousing* Purchasing* Total*
Management* management* Development*
C1 $15.03 $2.51 $1.41 $2.23 $4.85 $4.26 $30.29
C2 $20.35 $2.32 $1.33 $2.88 $4.85 $4.01 $35.74
C3 $19.86 $3.77 $1.40 $3.31 $4.85 $4.21 $37.40
C4 $16.57 $1.06 $1.39 $1.92 $4.85 $4.18 $29.97
C5 $138.49 $2.18 $10.60 $2.27 $4.85 $31.85 $190.24
C6 $63.29 $4.02 $6.49 $5.98 $4.85 $19.62 $104.25
C7 $13.82 $0.55 $2.27 $1.30 $4.85 $6.82 $29.61
C9 $233.21 $12.73 $15.15 $10.10 $4.85 $47.14 $323.18
C10 $170.54 $2.47 $13.25 $3.72 $4.85 $41.03 $235.86
ġġ*
Unit: NT $
ġ Table 5. Manufacturing Overhead őŦų Unit of Assembly Division
Production Quality Research and
őroduct Manufacture* Warehousing* Purchasing* Marketing* Total*
Management* management* Development*
F1 $77.40 $40.80 $42.53 $39.19 $43.78 $31.96 $47.95 $323.62
F2 $101.75 $75.41 $77.55 $67.57 $43.78 $59.93 $89.90 $515.90
F3 $90.34 $54.29 $101.41 $41.90 $43.78 $79.91 $119.87 $531.50
P1 $47.93 $30.42 $19.68 $30.49 $43.78 $14.80 $22.20 $209.31
P2 $37.95 $20.57 $19.39 $26.19 $43.78 $14.57 $21.85 $184.30
P3 $43.58 $28.81 $29.30 $33.79 $43.78 $21.79 $32.69 $233.75
R1 $37.38 $14.03 $9.22 $27.03 $43.78 $6.85 $10.27 $148.57
R2 $25.74 $8.51 $32.15 $12.16 $43.78 $23.97 $35.96 $182.29
R3 $34.40 $12.60 $42.53 $24.33 $43.78 $31.96 $47.95 $237.55
ġġ*
Unit: NT $

Table 6. Unit Cost Differences between VBC and ABC

4.4.4 Difference analysis őroduct VBC system* ABC system* Variance*
The unit cost of VBC and ABC system are shown in Table F1 $1,256 $1,237 $19
7 and Table 8. The comparison of cost differences between F2 2,160 2,313 (153)
VBC and ABC are summarized in Table 6. F3 1,536 1,810 (274)
The pricing strategy of case company uses cost-plus P1 827 797 30
method. Unit cost and target profit ratio are key factors to set P2 734 784 (50)
up product price. Higher cost sets higher price, but the loss of P3 790 774 17
market competitiveness. Therefore, provides accurate cost is R1 566 543 23
important to keep competitive power in the market. R2 533 556 (23)
R3 386 430 (44)
* Unit: NT $
 Tsung-Yueh Lu et al. / Procedia CIRP 63 (2017) 14 – 20 19

Table 7. Unit ńost of VBC System

Processing costs Assembly costs Unit
őroduct Material cost CNC Labor CNC Manufacturing Manufacturing Product
Outsourcing Cost Labor costs Cost
Costs Overhead Overhead
F1 $895.6 $117.0 $5.4 $21.7 $43.2 $172.8 $1,255.7
F2 1,655.2 92.3 25.8 103.0 56.8 227.1 2,160.1
F3 1,191.7 72.8 8.3 33.3 46.0 184.1 1,536.2
P1 667.7 0.0 0.0 0.0 31.9 127.7 827.3
P2 $51.5 53.8 20.6 82.3 25.2 100.9 734.3
P3 632.4 0.0 0.0 0.0 31.6 126.3 790.3
R1 308.0 27.9 25.5 102.2 20.5 82.1 566.2
R2 276.6 27.6 26.9 107.5 18.9 75.5 533.0
R3 186.8 31.2 17.5 69.9 16.2 64.6 386.1
*
Unit: NT $
Table 8. Unit Cost of ABC System
Processing costs Assembly costs
Unit\Product
őroduct Material Cost* Outsourcing Cost* CNC Labor CNC Manufacturing Manufacturing
Labor Costs* Cost*
Costs* Overhead* Overhead*
F1 $895.6 117.0 $5.4 $21.1 $43.2 $154.5 $1,236.9
F2 1,655.2 92.3 25.8 231.0 56.8 251.9 2,312.9
F3 1,191.7 72.8 8.3 231.0 46.0 260.5 1,810.3
P1 667.7 0.0 0.0 0.0 31.9 97.5 797.1
P2 451.5 53.8 20.6 148.2 25.2 85.0 784.2
P3 632.4 0.0 0.0 0.0 31.6 109.6 773.6
R1 308.0 27.9 25.5 94.4 20.5 67.0 543.3
R2 276.6 27.6 26.9 94.4 18.9 111.5 555.9
R3 186.8 31.2 17.5 94.4 16.2 83.9 429.9
*
Unit: NT $

4.4.5 Research Findings between resources consumption and cost during

The unit costs of products F2, F3, P2, R2 and R3 in ABC
system are higher than VBC system. Therefore, the case
company might increase product price to keep target profit
ratio because of using cost-plusġ method. The unit costs of
products F1, P1, P3 and R1 in ABC system are lower than
VBC systemįġ Two alternatives for case company, one is
remaining original price for higher profitability, or cut price
to raise market power in bicycle parts industry.
Case companies may re-examine manufacturing
processes with ABC cost information to identify the
presence of non-value-added activities to delete, combine,
rearrange and simplify activity, such as inspecting, moving,
and waiting andġ soġ on to increase performance and
profitability.
5. CONCLUSION
The main purpose of this paper is providing accurate
cost information to set price strategy through comparison
VBC with ABC system.
Research findings indicate that VBC system is unable to
reflect the activities and resources expired during
manufacturing process that will distort cost information.
The ABC system provide accurate information cost with
multiple activity cost drivers and causal relationships
manufacturing process. The cost information is important
references that help company set price strategy well.
The research framework, implementation process of ABC
system and research findings of this paper can provide
useful reference and contribution to the enterprises or
industries which is facing the fierceġglobal environment.
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