SIMPROCESS Features

Activity Based Costing (ABC)

Activity Based Costing (ABC) is a technique for accumulating cost for a given cost object (for example, a product, service or customer) that represents the total and true economic resources required or consumed by the object. The goal of ABC is to mimic the causal relationships among Resources, Activities, and Entities in Assigning costs. Resources perform activities to add value to products and services. The key to understanding cost dynamics in any enterprise is modeling the relationship between activities and their causes; and the relationship between activities and costs.

Significant value of the ABC analysis in SIMPROCESS comes from the dynamic analysis of costs based on the event-driven simulation. Because SIMPROCESS keeps track of resource interdependencies and captures the random nature of processes, the cost statistics provided by SIMPROCESS are far more accurate than results obtained from static analysis. The hierarchical modeling approach of SIMPROCESS facilitates this organization and accommodates varying levels of detail for ABC analysis.