Activity-Based Costing and Cost Interdependencies Among Products: The Denim Finishing Company
Coauthor(s): Dennis Caplan, Amir Ziv.
A fictional example illustrates how interdependencies among products in the production process, and the costs associated with those interdependencies, challenge the ability of cost accounting systems to generate decision-useful product cost information. The cost interdependency in the current example is a production-line change-over cost that is incurred to retool a machine whenever the production process changes from one product to another. Both marginal costing and full cost activity-based costing (ABC) are employed in an attempt to provide decision-relevant product-level information in connection with the decision to add a new product.
Source: Issues in Accounting Education
Melumad, Nahum, Dennis Caplan, and Amir Ziv. "Activity-Based Costing and Cost Interdependencies Among Products: The Denim Finishing Company." Issues in Accounting Education 20 (2005): 51-62.