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Activity based costing tool & benchmarking database development & extension project


Summary

Objective

To develop a user-friendly activity based costing (ABC) tool for wineries to allow them to assess their production costs, model the impact of process efficiency improvements and provide a decision-making tool with respect to process improvements and innovations.

Background

ABC is based on the apportionment of costs to specific ‘activities’ (e.g. crushing, bottling), rather than the traditional accounting approach that captures expenditure at the line item level (e.g. labour, electricity, materials). ABC provides greater transparency of expenditure to allow greater scrutiny of activities that generate the expenses.

An earlier project, 2XE 1301 Life cycle cost analysis of wine processing to identify major opportunities for process efficiency improvements, gathered data from 11 small, medium and large sized wineries and identified activity cost ranges across 16 activities commonly performed in wineries. 

Having this information available in a user friendly format would assist wineries by enhancing their knowledge of how and where the most cost-effective operational improvements can be made, to increase winery profitability and efficiency.

Research approach

This project will develop a user-friendly ABC tool that allows wineries to:

  • Input and attribute production costs (e.g. labour, electricity) to pre-defined winery activities
  • Compare their production cost performance against other wineries with similar business models and size

The ABC tool will be developed with 30 to 60 wineries to build a model for each business. The specific results will be shared with each participating winery and generic information will be collated for use in the database. It is anticipated that this will encourage and empower wineries to make data-driven, evidence-based decisions to drive operational improvements.

Sector benefits

The ABC tool and benchmarking database will allow wineries to assess production costs, and target improvements in processes, activities and products that achieve the greatest improvements in efficiency and profitability. It will provide the sector with the means to benchmark its cost-of-production performance against domestic industry averages.