Data mining and activity based costing for equipment replacement decisions Part 1 – establishing the information infrastructure

Abstract

This paper discusses the first steps in a process which combines historical production and cost data with long term mine schedules to develop an equipment replacement analysis tool. The focus is on the enabling technology of data mining, used to define key physical and economic parameters for the proposed model, as well as model the relationships between key variables. This research considers two types of physical parameters for equipment replacement analysis purposes: operational and maintenance parameters. Activity based costing, an evolutionary extension of the two stage procedure in modern cost accounting, is applied in this research to determine full operating and maintenance costs by machine. This technique is mainly used to trace costs such as general expenses (e.g. overhead costs) from activities to products based on a representative cost driver.