Does Cost Drivers’ Prediction Under ABC Systems Reduce Total Manufacturing Cost of Heavy Industries?

Abstract

This paper exhibits the issue of predicting cost drivers for the purpose of more accurate allocation rates and cost reduction in heavy industries, the paper applies the issue to aeroplanes industry as an example. This paper uses ARIMA(0,1,1) model to predict the cost driver of an example of number of measures in tests of sections of in process aeroplanes. The findings show insignificant and slight prediction errors, which develop a method for predetermining the overhead cost allocation rates, but cannot, develop a method for reducing costs without experts and strategists judgments considering multiple independent variables. The paper redevelops the need for future research to replicate findings to answer this paper’s question.

Keywords: cost drivers, cost prediction, activity – based – costing, time driven activity - based - costing, aeroplanes industry, and heavy industries