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Activity-Based Costing
Blocks of interest
Activity-based costing (ABC) is a method of identifying and tracking the operating costs directly associated with processing items. It is the practice of focusing on some unit of output, such as a purchase order or an assembled automobile, and attempting to determine as precisely as possible its total cost based on the fixed and variable costs of the inputs. ABC helps identify, quantify, and analyze the various cost drivers (such as labor, materials, administrative over- head, rework, etc.) and determine which ones are candidates for reduction.
Once a model has been built, the dis-
crete outputs of the system, as well as
the processes and resources that are
involved in creating those outputs,
have already been identified. To add
ABC to models, you enter costing
information into dialogs of blocks in
the model. Blocks that generate items
or provide resources, and blocks that
process items, have fields and Cost
tabs for specifying costing data. Enter
variable cost rates per time unit and
fixed costs per item or use. After the
cost information has been defined, costs will automatically be tracked as the items in the model change state.
This chapter covers:
• Identifying cost accumulators and resources • Defining fixed and variable costs
• How ExtendSim tracks costs
☞ The models illustrated in this chapter are located in the folder \Examples\Discrete Event\ABC.
Blocks of interest
The following blocks are the main focus of this chapter. Each block’s library and category appears in parentheses after its name.
Cost by Item (Item > Information)
Calculates the cost of every item in the model, as well as the average and total cost of the process.
Cost Stats (Item > Information)
Records the input costs and total cost generated in each costing-based block. Deter- mines total model cost based on a specified confidence interval.
In addition to the two Cost blocks, many of the Item library blocks have cost fields or a Cost tab for entering and reporting cost information, or have cost-handling capabilities, as shown in the table below:
Cost tab of Activity block
Blocks with Cost tabs or fields
Activity Convey Item
Blocks with cost-handling capability
Batch Get
Discrete Event

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