Potentials of Activity Based Costing (ABC) Modeling in Developing Expert System for Cost Estimation in Job Shops

Abstract

Maintaining profitability and operational efficiency in competitive manufacturing environment entails accurate cost estimation. The need for expert system development for accurate cost estimation in job shops, where custom, low-volume products manufacturing becomes crucial. This study leverages the Activity-Based Costing (ABC) model, a method known for its precision in assigning costs to products based on the activities required for their production. The expert system is design to assist small and medium-sized enterprises (SMEs) in making informed pricing decisions by providing reliable cost estimates. Developed using JavaScript, Tailwind CSS, and Zustand for state management, the system offers an intuitive user interface and real-time feedback. Developing an expert system for cost estimation in a job shop using the Activity-Based Costing (ABC) model fills the gap in traditional methods and other less accurate costing methods by providing a more accurate and detailed approach to cost estimation. The expert system was tested using eleven jobs executed by a job shop, the cost variance analysis uncovered a substantial 20.73% decrease in total income, totaling N63,320, highlighting the company's oversight in accounting for critical cost factors.  The ABC model, as demonstrated in the study, offers a more precise way to calculate overhead costs and determine the total cost of a product. By integrating expert knowledge and utilizing a dynamic programming approach, the proposed model enhances the accuracy and efficiency of cost estimation under uncertainty, outperforming existing models and providing a user-friendly mechanism for job shop managers.