ABC example

Komplex GmBH has four production lines, which each operates for 8,000 hours a year. Each line makes a number of products, which are based on size and colour. Many changeovers are therefore required, each incurring set-up and maintenance costs. Traditionally the maintenance costs have been allocated on the basis of machine hours, so each production line is charged equally. This year, the maintenance budget of 1 million has been divided into four, so each line is charged with 250,000. 

The results are illustrated in Table 3.4. Maintenance costs have now been transferred to the production lines that incur the activity. For example, costs on line 

A have doubled to 500,000, while costs on line D have reduced to 50,000. ABC in this example has not taken cost out of the process, but has reallocated the costs to give a better understanding of the cost base. Complex is now in a better position to make decisions that affect the cost competitiveness of the product range. 

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Bodies have different degrees of attraction for one another, which may be determined by experiment. If a body A is presented to a compound BC four cases are possible (i) no action, (ii) A + BC = ABC (a ternary compound), (iii) A + BC = AC + B completely, (iv) A combines with part only of BC to form a compound different from ABC. Examples (iii) and (iv) correspond with Bergman s elective attraction. Double elective attractions are divided into a) A+B+CD AC+BD, and (6) AB+CD =AC +BD. Numerical examples are given. 

See Related Document ABC (example) for first-aid/self-aid procedures to be used in the event of emergency conditions arising during operations described in this SOP. 

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