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The Departmental Activity-Based Costing System of a Korean Company: The Case of Anam Industrial Co., Ltd.

  • Kim Soonkee
    Department of Business Administration, Sogang University
  • Lee Gunyung
    Department of Business Administration, Osaka Sangyo University
  • Kim Talkon
    Graduate School of Business Administration, Sogang University

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  • 韓国企業の部門別活動基準原価計算の導入事例:亜南産業(株)
  • カンコク キギョウ ノ ブモンベツ カツドウ キジュン ゲンカ ケイサン ノ

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Abstract

<p>Anam Industrial Co., Ltd., a world leader in packaging and testing semiconductor products, adopted Activity-Based Costing(ABC) in 1992. This was the culmination of nearly two years of experimentation. ABC was recommended initially by AmKor Electronics, Inc., a subsidiary of Anam in the U.S.A.</p><p> Semiconductor products assemblers have their uniqueness in that manufacturing overhead costs consume a significantly higher percentage among total manufacturing costs. Therefore the manufacturing overhead allocation procedure can greatly influence the determination of the production cost of an individual product. In this regard, Anam has decided to adopt ABC to obtain more accurate production cost information, which is essential to successfully negotiate with the customers the price of the particular product.</p><p> This company implements the departmental activity-based costing system(ABCS), which is a simplified version of ABCS. Under this system, the entire budgeted amount of a particular department is first allocated to the related activities of that department. Then the allocated activities cost in turn is assigned to related products based on the cost driver.</p><p> This simplified cost assignment procedure was criticized in some previous studies in that it resulted in some arbitrariness in the allocation process. However at the same time, their effectiveness was highly evaluated in some other studies. Through the use of ABCS, Anam corrected the distorted product cost information which had obtained from the existing costing system. The more accurate cost information obtained from ABCS was effectively used by Anam in price negotiations with its customers. Also ABCS made it easier to figure out how cost would vary with changes in the product design. Additionally, its departmental ABCS turned out to be very effective in restructuring Anam's organization, mitigating the consequent organizational resistance.</p>

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