Strategic Cost Allocation with Value Stream Costing: Data-Driven Decision Analysis in Textile Manufacturing

Cost allocation holds paramount importance for businesses, serving as a fundamental aspect of competitiveness in the contemporary market milieu. This includes maintaining high-quality standards in products or services, alongside operational flexibility to adapt to changing customer demands and market conditions. Moreover, accurate assessment of product costs is crucial for guaranteeing the profitability of the company and maximizing the efficient utilization of operational resources. Businesses using the traditional costing approach may face difficulties when allocating total production expenses to individual products. Hence, this study aims to comprehensively analyze the cost system of a medium-sized textile company by incorporating principles of value stream costing. It employs methodologies namely COBRAC, FUCOM, and BWM to identify key cost drivers. The firm identified 12 value streams for its five products and relied on expert opinion to assess costs for eight of them without drivers. The results indicated that the method chosen for cost calculation notably impacts the gross profit showcased in the income statement. Specifically, the FUCOM approach emerges with the highest gross profit among the evaluated methods, closely trailed by the BWM technique, whereas the employment of the COBRAC method yields a relatively lower gross profit value. The suggested model will empower manufacturing firms to pinpoint product costs and effectively attain a sustainable competitive advantage.