The implications of activity-based costing on profit determination: A case study of PT. Nichindo Manado Suisan
DOI:
https://doi.org/10.58784/cfabr.480Keywords:
activity-based costing (ABC), cost of goods manufactured (COGM), cost distortion profit, profit determination, traditional costingAbstract
Inaccurate overhead cost allocation in manufacturing can lead to cost distortion, which negatively impacts pricing strategies and profit determination. This study aims to evaluate the implementation of Activity-Based Costing (ABC) in calculating the Cost of Goods Manufactured (COGM) and its implications for profitability at PT. Nichindo Manado Suisan, a multi-product seafood processing company. Employing a qualitative descriptive approach, data were gathered through semi-structured interviews, direct observations, and documentation. The findings reveal that while the aggregate COGM and operating profit showed negligible differences between traditional and ABC methods, significant cost distortions occurred at the individual product level. The traditional volume-based costing method resulted in overcosting for the primary product (Ikan Kayu) and undercosting for secondary products (Bubuk Ikan Kayu and Serutan Ikan Kayu). This distortion was primarily driven by the traditional method's failure to account for batch-level and facility-level activity consumption. The study concludes that ABC provides superior visibility into actual resource consumption, mitigating product cross-subsidization. It is recommended that management transition towards activity-based overhead tracing to enhance strategic pricing and optimize product-mix decisions.
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