The application of activity-based costing (ABC) to drive cost reduction efforts for a new IC product line

Summary from only given. Activity-Based Costing (ABC) is a process which enables the assignment of costs to products based upon the use of resources in the creation or manufacture of the product. This paper presents a case study on the application of ABC to calculate the cost per wafer and to drive cost reduction efforts for a new IC product line. The study was performed in six phases: forming the ABC team; developing the ABC model; costing the product line; planning cost reduction efforts; implementing cost reduction; and evaluating results. The ABC management team efforts resulted in significant reduction in the manufacturing costs of the new product line. In addition, the ABC model demonstrated the sensitivity of the cost per wafer to such parameters as composite yield, production volume, utilization rate of existing equipment, and the cost of purchasing of new equipment.