001: lO.l29821CMUJNS.20IS.0094
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CMUJ NS Special Issue on Lriislics and Supply
Cl1ai~ Systems (2015) VcI.14(4) 1379
Different Cost Allocation Methods in Material Flow Cost
Accounting:.~.Case Study of Waste Reduction
in Thai Meatball Production
Chompoonoot Kascmsct l * and_ Chawis no~nmec'Z 'Department oflndush·ial Engineering. Faclllt)'o}£ngineering. Chiang Mai Univel"Si'J~
Chiang Mai 50200, Thailand _'
lDivision of Sustainable and Environmental Engineering, Muroran Institute of
Teclmolog;~ lIokkaido, Japan
·Correspondillg uuthol: E-mail:
[email protected];'
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ABSTRACT TIre objective of this research was ta study the effect of applying dired or iI/direct cost af/ocatiOlI methods ill Material Flow Cost Accounting (MFCA) analysis. Meatball production was selected as the case stlldy. The direct method focused Oil tIre processes witlr large qnalltities ofwastefor improvement, witllOllt regard to the cost ofthe material wasted. Or1 the otlter hand, tire indirect metlrod, wlJich allocates cost based 011 the cost of materials, focused 0" tile processes with tlte most costly waste in its improvement solutions.· Thus, the differeltt methods of-cost af/ocation could target different proces£1Es) for improvement. When matcrials used ill a target product had the same cost and the quantity of waste was ea.\"ily measured ill tire same Imit, the direct and indirect cost a/locatlOlr methods provided similar results. Blit whe" i"put mater;als differed i" tlteir costs and mea.'i/lremettt rmils, tlte i"direct cost allocation method was recommended. Keywords: Material flow cosl - with the indirect method, the Rp ratio was 95.0% and (l-Rp) was 5.0%.
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Figure 5. Cost diagram comparison between the two methods. As Chaiwan et al. (2015) applied the direct cost allocation in the MFCA calculation, the results from their study showed that negative'product cost of Me was the biggest part (77.4%) of the lotal negative cost. Thus, reducing waste ma terial in the material preparation step was proposed as the improvement solution for their study. They found two kinds of material waste: wastewater from melted ice and pork scraps. The quantity of wastewater was more than the quantity of pork scraps. Thus, they proposed eliminating the wastewater by introducing a refrigerator, instead of icc, for cooling the pork mixture.
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71 CMUJ NS Special Issue on logislics and Supply Ch:ajn .Systems (20IS} VoLl414)
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The indirect cost allocation method rev.ca[ed three processes with negative material costs; material preparation (5.0%), grinding and mixing (4.0%), and cooking (4.0%). Thus, this method points to improving three processes, rather than concentrating on only one, as in the direet cost allocation method. This will help the company to reduce more waste along the entire production line. More over, the indirect cost allocation method focuses first on the l!!gh cost ma~rial for improvement. As for meatball production, the primary material wastes were pork scraps and wastewater, with pork scraps the more expensive-of the two. Thus, in proposing a reduction in pork seraps, the eoncept of design 61' e}
