Activity based costing approch for product costing-A pilot study:Yuken India Ltd.: Banglore-Indian Institute of Management Banglore. Banglore.

Abstract

Yuken India Ltd. ( YIL ) was set up in 1976 in technical and financial collaboration with Yuken Kogyo Company Ltd. Since its incorporation YIL has been able to establish itself as a major force in oil hydraulic industry. Today it has been accepted as a preferred source of supply by many original equipment manufacturers. In today's liberalised Indian economic environment, where the competition is fierce, true understanding of the manufacturing cost is going to be a major factor. The understanding of the cost and the cost management is going to be the competitive advantage for Indian industry that has to fight the competition with price advantage. The main aim of this study is to evaluate existing costing and pricing method by comparing with the cost obtained by activity based costing system and to see whether cost measured by existing system is in line with the changes in market condition. Till 1977 product costing involved calculating only direct material cost. During 1998 an attempt has been made to find out total cost of the product by allocating the overheads as a percentage of material cost. But this does not provide a detailed insight into product costing, especially if one wants to know the relationship between resource consumption and activity level. Incontrast, ABC permits costs to be charged to the products much more accurately as it is able to break down overheads far more precisely.