Cost modeling analysis in sand casting foundry

This paper proposes an enhanced Activity-Based-Costing (ABC) dedicated to the sand casting industry by combining a traditional ABC approach with a mix of dimensional analysis and linear regression method. The approach developed in the article is very general and can be used in other domains without problems. The method has been chosen based on an initial analysis of the existing cost modeling methods. This analysis shows clearly that the traditional methods focusing on the direct costs are not accurate for evaluating costs when overheads are representing more than 70% of this cost structure. This element combined with the fact that ABC approach is often based on a very limited number of synthetic cost drivers has lead us to develop an enhanced ABC model. This model stays coherent with the traditional ABC approach but it improves the ability of the model to fit more accurately with the reality of cost structures inside of companies.