BAITA ENGINEERING

Journal of Naval Architecture and Marine Engineering

Vol.1, No.1, June 2023, pp. 28-35; e-ISSN: xxxx-xxx; p-ISSN: 2685-4325

Activity-Based Costing Method Application Activity in

Determining the Production Cost of Aluminum Ships in the
Small Shipyard Industry
Imamul Choir A.M. 1) Intan Baroroh2,*)
1)Department of Naval Architecture, Faculty of Engineering and Marine Science, Universitas Hang Tuah,
Surabaya, 60111, Indonesia.

Article Information ABSTRACT

Article History:
Received: February 12, 2023
Accepted: April 26, 2023
Published: June 26, 2023
*Correspondence Author:
Intan Baroroh
intan.baroroh@hangtuah.ac.id
DOI:
https://doi.org/10.30649/baitaen
gineering.v1i1.9
In the ship production process, each construction component has a price
value that will be taken into account how much raw material costs, labor
costs, and other costs will be incurred, producing the finished product of
a ship. This study aims to determine the calculation of the Production
Cost of aluminum boats using the application of activity-based costing
methods. As well as to find out the comparison of the calculation of the
Production Cost of aluminum ships with traditional system methods and
activity-based costing. At the data analysis stage, this study uses the
activity-based costing method. The end result of this study is in the form
of data from the results of data analysis from the application of the
activity-based costing method, the advantages and disadvantages
obtained while using this method. Based on the research results it can be
concluded that by using the activity-based costing method, the company
will get a positive impact in calculating the Production Cost in imposing
factory overhead costs on each product.

Keywords: Production Cost, Activity-based Costing, Aluminum Ships

Copyright © 2023 BAITA Engineering: Journal of Naval Architecture and Marine Engineering. This is an open access article
under the CC BY license (https://creativecommons.org/licenses/by/4.0/)

1. INTRODUCTION
Ships are water transportation tools that have different shapes, types and functions. Where
mostly all ships are driven by engine power and functioned for the need to move one or another
item. In the process of ship production, each construction component has a price value that will
be taken into account how much the cost of raw materials, labor costs, and other costs will be
incurred, so as to produce a finished product of a ship. This requires all costs to be calculated
optimally, in order to produce selling points at economical prices and still have sweet profits.
Determination of the Production Cost is a very important part for the company. Because you have
to know the total costs that have been incurred in producing a product. The cost of goods in
question is a number of production costs which include raw material costs, labor costs, and
factory overhead costs. Sometimes the company's management is not right in charging costs that
should be included in determining the Production Cost.

Determination of the Production Cost that is not right will cause the determination of the
selling price of the product that will not be right for the company. If the determination of the
Production Cost is correct then it can be known and determined precisely. So that the company
can clearly know the profit that will be obtained by the company.
According to Supriyono (2011: 144) suggests the Production Cost is the assets or services
sacrificed or submitted in the production process which includes raw material costs, labor costs,
factory overhead costs and including production costs.

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According to Mulyadi (2007:41) the benefits of determining the Production Cost include
determining the selling price of products, monitoring the realization of production costs,
calculating periodic profit and loss, and determining the cost of inventory of finished products
and products in the process which are used in the balance sheet.
According to Mulyadi (2007: 53) Activity-based Costing System is an activity-based cost
information system designed to motivate personnel to reduce costs in the long term through
activity management.

The purpose of this study is to determine the calculation of the Production Cost of
aluminum vessels using the application of the activity-based costing method and to determine
the comparison of the calculation of the Production Cost of aluminum vessels using the
traditional system method and activity-based costing. The benefits of this research for ship
manufacturers in making decisions choosing the method of calculating the Production Cost and
to improve supervision of the overhead costs of each activity. In addition, the benefits for
researchers are as scientific information to increase knowledge regarding the application of
activity-based costing methods in the aluminum shipbuilding industry.

2. METHOD
This research was conducted at CV. Javanese Boat Indonesia, which is located at Jl. Keputih
Tegal Timur No. 60 Surabaya City (Small Workshop) and on Jl. Jl. Lingkar Timur Blok S 1869
Sidoarjo Regency (Big Workshop).
The research method used in this study is a qualitative descriptive method. According to
Sugiyono (2018) a qualitative research method is a research method used to examine natural
object conditions, where the researcher is a key instrument, data collection techniques are carried
out in a triangulation (combined) manner, data analysis is inductive, and qualitative research
results emphasize meaning from generalization.

Data collection techniques in this study were carried out by means of observation,
interviews, and documentation. This data collection technique is used to obtain information or
supporting data that will be carried out in this study.
The data analysis technique in this study uses the activity-based costing method in determining
the Production Cost of aluminum boats. The steps of data analysis carried out in this study, are:
a. First Stage:
1) Identify and classify various activities.
2) Linking various costs with activity costs.
3) Determine the right Cost Driver.
4) Determination of homogeneous cost groups
5) Determination of group rates (Pool Rate)
b. Second Stage
1) The second stage is to determine the Production Cost, such as costs for each group of
factory overhead costs traced to various types of products. This is done using the
group rates consumed by each product.

3. RESULT AND DISCUSSION

Traditional cost systems and activity-based costing system methods can take into account
the Production Cost. But to know the value of accuracy in determining the Production Cost must
be precise in choosing the method of calculation. So that the value of the selling price can be
determined accurately from the results of the method of calculating the Production Cost. From
the observations of the research conducted, it was explained that CV. Javanese Boat has not
implemented an activity-based costing system to calculate the Production Cost. During this time
the company CV. Javanese Boat still uses a production price calculation based on a traditional
costing system.

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3.1. Calculation of Production Cost Using Activity-based Costing System

Section Calculation of the Production Cost in the company CV. Javanese Boat using an
Activity-based Costing System is as follows:

3.1.1. Raw Material Costs

Raw material costs are an integral part of the finished product and can be traced directly
from the product to completion. According to Triska (2019), materials that form an integral part
of finished production. The details for calculating the cost of raw materials for the JAL 5620 Ship
can be seen in the following table 1.

Table 1. Cost of Using JAL 5620 Vessel Raw Materials

Raw Material Costs
Product Name Total Construction Weight Total Cost of Raw Materials
Kapal JAL 5620 535 IDR 62,475,075

Based on table 1, it shows that the cost of using the raw materials used on the JAL 5620 Ship
is IDR 62,475,075 and has a total construction weight of 535 kg.

3.1.2. Direct labor costs

Direct labor cost is the cost of labor used in converting raw materials into finished products.
These costs can be traced directly to the finished product. According to Triska (2019), physical
effort or mental effort expended by employees to manage employees. The details of the
calculation of direct labor costs can be seen in the following table 2.

Table 2. Direct Labor Cost for JAL 5620 Vessel

No Details Kapal JAL 5620
1. Designer IDR 1,203,750
2. Making JIGs IDR 1,203,750
3. Plate Marking and Cutting IDR 8,025,000
4. Plate Assembly IDR 13,642,500
5. Welding IDR 13,642,500
6. Painting IDR 2,407,500
Total IDR 40,125,000

Based on table 2, it shows that the total direct labor costs incurred to produce the JAL 5620
ship amounted to IDR 40,125,000. Work performed by direct labor includes designing, making
JIG, marking and cutting plates, assembling plates, welding, and painting.

3.1.3. Calculation of Factory Overhead Costs

Factory overhead costs are costs other than the cost of direct materials and direct labor but assist
in converting materials into finished products. The calculation of factory overhead costs has a
very important influence on the Activity Based Costing method for calculating the cost of
production. According to Triska (2019), all production costs that cannot be classified as direct
material costs or direct labor costs. The following is a calculation of factory overhead costs
according to the Activity Based Costing System::
a. First Stage Procedure
1. Identify and classify various activities. According to Agus (2020), Identification of
activities is to identify a number of activities that are considered to incur costs and are
separated into activities that provide added value (value added) and do not provide
added value (no added value).

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Table 3. Classification of Costs into Various Activities at the Company CV. Javanese Boat
No Activity Activity Level
1. Product Design Level Unit
2. Making JIGs Level Unit
3. Plate Marking and Cutting Level Unit
4. Plate Assembly Level Unit
5. Welding Level Unit
6. Painting Level Unit

Table 3 shows that the division of costs into various activities at Javanese Boat Company,
which includes product design activities, JIG manufacturing, plate marking and cutting, plate
assembly, welding, and painting. All of these activities include activity levels based on unit level.
Unit-level activities are activities that are performed each time a unit is produced.

Table 4. Classification of Costs into Various Activities at the Company CV. Javanese Boat
(Continue)
No Activity Activity Level
7. Accessories Installation Level Unit
8. freight Level Unit

Table 4 shows that the classification of costs into various follow-up activities at the Javanese
Boat company, which includes the activities of installing accessories and transportation. Both
activities include activity level by unit level. Unit level activities are activities that are performed
every time a unit or component is produced.
2. Associating various costs with various activities. In this step, identification of the cost
drivers of each activity is carried out. According to Agus (2020), Similar grouping of
activities into one based on unit, batch, product, and facility.
- Product design activities, JIG making, plate marking and cutting, plate assembly,
welding, and painting. So, what can be used as a cost driver is direct labor hours.
- Accessories installation activities. So, what can be used as a cost driver is one component
of these accessories.
- Transport activity. Then what can be used as a cost driver is the number of units.

3. Determine the right Cost Driver. According to Nida (2021), it is different from
calculating the cost of production carried out by companies where companies only use
one cost driver, namely the number of units. Meanwhile, in the Activity Based Costing
method, each cost has a different cost driver.

Table 5. Cost Driver Determination

No Activity Activity Level Cost Driver
1. Product Design Level Unit Direct Labor Hours
2. Making JIGs Level Unit Direct Labor Hours
3. Plate Marking and Cutting Level Unit Direct Labor Hours
4. Plate Assembly Level Unit Direct Labor Hours
5. Welding Level Unit Direct Labor Hours
6. Painting Level Unit Direct Labor Hours

Table 5 shows that the determination of cost drivers includes product design activities,
JIG manufacturing, plate marking and cutting, plate assembly, welding, and painting. All of these
activities that can be used as cost drivers are direct labor hours.

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Table 6. Cost Driver Determination (Advanced)

No Activity Activity Level Cost Driver
7. Accessories Installation Level Unit Number of Components
8. freight Level Unit Unit Amount

Table 6 shows that the determination of cost drivers includes follow-up activities, namely
the installation of accessories and transportation. The two activities that can be used as cost
drivers are the number of components and units.

Table 7. Cost Driver Detail on JAL 5620 Ship

No Cost Driver Amount
1. Direct Labor Hours 1000 hours
2. Component Units 1 component
3. Number of units 1 unit

Table 7 shows that the details of the cost drivers on the JAL 5620 Ship include direct labor
hours from the activities in table 5 which have consumed 1000 hours, installation of 1 component
unit accessories, and 1 unit of transport unit.

4. Determination of homogeneous cost groups. According to Nida (2021), this cost

grouping is intended to group with the same cost driver. So, related cost drivers can be
included in a cost pool by using one of the selected cost drivers. In this step it is carried
out to determine homogeneous cost groups. The goal is to streamline the formation of
too many cost groups.

Table 8. Cost Pool Activity Details I

Activity Type Cost Driver Cost (Rp)
Product Design Direct Labor Hours IDR 49,036
Making JIGs Direct Labor Hours IDR 1,654,711
Plate Marking and Cutting Direct Labor Hours IDR 1,243,516
Plate Assembly Direct Labor Hours IDR 1,171,035
Welding Direct Labor Hours IDR 9,164,320
Painting Direct Labor Hours IDR 4,086,777
Total IDR 17,369,395

Table 8 shows that the total breakdown of costs per activity in Cost Pool I for all types of
product design, JIG manufacturing, plate marking and cutting, plate assembly, welding, and
painting is IDR 17,369,395.

Table 9. Details of Cost Per Activity Cost Pool II

Activity Type Cost Driver Cost (Rp)
Accessories Installation Unit Komponen IDR 1,250,000
Total IDR 1,250,000

Table 9 shows that the total breakdown of costs per activity in Cost Pool II from the
activity of installing accessories is IDR 1,250,000.

Table 10. Details of Cost Per Activity Cost Pool III

Activity Type Cost Driver Cost
freight Unit Amount IDR 1,800,000
Total IDR 1,800,000

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Table 10 shows that the total cost breakdown per activity Cost Pool III of the transportation
activity is IDR 1,800,000.

5. Determination of group rates (Pool Rate). According to Nida (2021), group rates are
factory overhead rates that have been previously calculated or accumulated factory
overhead costs divided by the basis for measuring the activity of the group. Group rates
are used to calculate the factory overhead for each product. So, with this calculation,
factory overhead costs no longer use just one cost driver, but are in accordance with
each cost driver.

Table 11. BOP Cost Per Activity Group

Tarif Cost Pool Cost Driver Cost
Cost Pool (a) (b) (a) : (b)
(Rp) (Rp)
Cost Pool I IDR 17,369,395 1000 IDR 17,369
Cost Pool II IDR 1,250,000 1 IDR 1,250,000
Cost Pool III IDR 1,800,000 1 IDR 1,800,000

Table 11 shows that the factory overhead rate (BOP) for each cost pool has been divided
from the cost pool rate by the cost driver. Thus, resulting in different rates. The cost pool I tariff
is IDR 17,369, the cost pool II tariff is IDR 1,250,000, and the cost pool III tariff is IDR 1,800,000.

b. Second Stage Procedure

According to Nida (2021), the second stage is in determining the cost of production,
namely the costs for each group of Factory Overhead Costs are calculated for various
types of products. So in this second stage, Factory Overhead Costs are assigned to
various products with an Activity Based Coting System.

Table 12. BOP Imposition with Activity-based Costing System on JAL 5620 Ship
Cost Pool Tarif Cost Pool Cost Driver Jumlah
(Rp) (Rp)
Cost Pool I IDR 17,369,395 1000 IDR 17,369
Cost Pool II IDR 1,250,000 1 IDR 1,250,000
Cost Pool III IDR 1,800,000 1 IDR 1,800,000
Total Cost of JAL 5620 Vessel IDR 20,419,395

Table 12 shows that the total breakdown of BOP charges with the Activity Based Costing
System on the JAL 5620 is IDR 20,419,395.

Table 13. Calculation of the Production Cost Using the Activity-based Costing System on the JAL
5620 Ship
Information Kapal JAL 5620
Raw Material Costs IDR 62,475,075
Direct labor costs IDR 40,125,000
Factory Overhead Cost IDR 18,619,395
HPP IDR 123,019,470
Product Units 1
HPP Per Product IDR 123,019,470

Table 13 shows that the total breakdown of cost of goods manufactured with the Activity
Based Costing System on the JAL 5620 is IDR 123,019,470.

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3.2. Comparison of Production Cost with Traditional Systems and Activity-based Costing
Systems at CV. Javanese Boat
The results of the comparison of the cost of production of the traditional system with the activity-
based costing system are shown in Table 14.

Table 14. Comparison of the Production Cost of the Traditional System with the Activity-based
Costing System on the JAL 5620 Ship
Product Traditional ABC System Difference Condition
System Value
Kapal JAL 5620 IDR 121,219,470 IDR 123,019,470 -IDR 1,800,000 Undercost

There is a difference that occurs between the cost of production based on the traditional
system and the activity-based costing system due to the imposition of factory overhead costs on
products as shown Table 14. In the traditional system, factory overhead costs for each product
are only charged to one cost driver, namely the number of production units. The company
calculates the overhead rate by charging indirect labor costs, auxiliary material costs, and
electricity consumption costs. As a result, there is a distortion in the imposition of factory
overhead costs. In an activity-based costing system, factory overhead costs for each product are
charged to several cost drivers. So that the activity-based costing system is able to allocate costs
including factory overhead costs into activities for each product appropriately based on the
activities that occur. The difference in the calculation of overhead costs causes the overhead costs
charged to the JAL 5620 Ship to be different.

4. CONCLUSSION
Based on the calculation of the Production Cost for the calculation of the traditional system
on the JAL 5620 Ship, the results of calculating the Production Cost are lower (undercost)
compared to the Production Cost based on the activity-based costing system, with a price
difference of -Rp 1,800,000. This is because there is a difference that occurs between the
Production Cost based on the traditional system and the activity-based costing system caused by
the imposition of factory overhead costs on products. In the traditional system, factory overhead
costs for each product are only charged to one cost driver, namely the number of production
units. The company calculates the overhead rate by charging indirect labor costs, auxiliary
material costs, and electricity consumption costs. As a result, there is a distortion in the imposition
of factory overhead costs. In an activity-based costing system, factory overhead costs for each
product are charged to several cost drivers. So that the activity-based costing system is able to
allocate costs including factory overhead costs into activities for each product appropriately
based on the activities that occur. The difference in the calculation of overhead costs causes the
overhead costs charged to the JAL 5620 Ship to be different.

5. ACKNOWLEDGE
Thank you very much to Mr. Arie Surjono as the head of the CV. Java-nese Boat Indonesia
Company which has allowed the author to retrieve research data from his company.

6. BIBLIOGRAPHY
Agus dkk. 2020. Activity Based Costing: Metode Dalam Perhitungan Harga Pokok Produksi.
Media Bina Ilmiah. 14(8), 3005-3014.
Firda dkk. 2021. Implementasi activity based costing pada perusahaan manufaktur, jasa,
dan umkm : Sebuah studi literatur. Keberlanjutan : Jurnal Manajemen dan Jurnal
Akuntansi. 6(2), 116-129.
Mulyadi. 2007. Activity-based Cost System: Sistem Informasi Biaya untuk Pengurangan Biaya.
Edisi ke-6. Yogyakarta, UPP AMP YKPN.
Pramitasari, Triska Dewi. 2019. Penerapan Metode Activity Based Costing (ABC) Dalam
Menganalisa Kinerja Kemandirian Keuangan. Jurnal Penelitian Ipteks. 4(2), 117-130.

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Ridwan, Nida Faradiba dan Suherman, Acep. 2021. Activity Based Costing Dalam Penentuan
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Supriyono. 2011. Akuntansi Biaya, Perencanaan dan Pengendalian Biaya, serta Pengambilan
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