What question did this study set out to answer?

The aim is to create an appropriate product costing model for flexible manufacturing systems distinct from conventional methods.

June 15, 2026

Product Costing in Flexible Manufacturing Systems.

Key Points

The aim is to create an appropriate product costing model for flexible manufacturing systems distinct from conventional methods.
Developed a costing model with two major components: direct materials and transformation costs.
Redesigned cost categories and overhead allocation schemes specific to flexible manufacturing systems.
Presented a numerical example based on a field study to illustrate costing procedures.
The new model simplifies costing by reducing cost components from three to two.
Setup costs are capitalized, improving accuracy in product cost allocation.
Different types of intermediate cost pools enhance the allocation process for manufacturing costs.

Abstract

Abstract The product costing methods developed for conventional manufacturing systems are inappropriate for use in computer-integrated and automated manufacturing systems. These new systems have totally different operational characteristics which require redesigning of cost categories, overhead pools and allocation schemes. This paper develops a product costing model for a specific type of new system called a Flexible Manufacturing System. This model has two major cost components (direct materials and transformation costs) compared to the three found in conventional methods. Some setup costs are capitalized and charged to products when they are produced. To charge manufacturing costs accurately and correctly to the products processed, many different types of intermediate cost pools and allocation schemes are used. A numerical example based on a field study is presented to clarify the steps in the procedure.

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