Softer water

for consumers
A case study
 Phạm Lý Nhã Ca ( ca.2175106050379@vanlanguni.vn)

Hoàng Văn Dũng ( dung.2175106050348@vanlanguni.vn )

Lê Thị Ngọc Thẫm ( tham.2175106050346@vanlanguni.vn )

Lê Thị Như Uyển ( uyen.2175106050318@vanlanguni.vn )

Hồ Thị Thanh Vân ( van.2175106050385@vanlanguni.vn )

ABSTRACT

Activity Based Costing (ABC) is one of the new methods began appearing as a costing methodol-ogy in
the 1990’s. It calculates cost price by determining the usage of resources. In this study, ABC method was
used for calculating cost price of remedial services in the use of soft water. After applying ABC method,
we will know the establishment of softening plants is to be financed through user payments (according
to the rest-in-itself principle), the water price will increase by 1.80 DKK/m3 when establishing a water
softening plant. If hard water is softened, the life of household appliances will be extended and
energy costs will be reduced. Specifically, we will save 302 DKK/year for 4 home appliances and the
savings from extended lifespan and reduced energy consumption is 444 DKK/year. So, cost price of
remedial services with tariff method is not properly calculated when compared with ABC method.
ABC calculates cost price by applying suitable mechanisms but method is based on the fixed price. In
addition, ABC represents useful information about the amount and combination of cost price
services.

1. INTRODUCTION

Hard water has been a nuisance to households and businesses for many years. The hardness of the
water results in additional costs and annoyances when faucets drip, toilets run, and time and effort is
required to remove lime from tiles, toilets and household appliances. Hard water also shortens the life
of household appliances such as washing machines, dishwashers and electric kettles, as well as for
installations such as hot water tanks, toilets and faucets. The hard water is also a burden on the
environment, as electricity consumption and, consequently, CO 2 emissions increase when heaters and
hot water reservoirs become calcified. HOFOR has therefore initiated a project in which water treatment
plants will be built so that the hardness of the water can be reduced to 10 °dH. The first softening plant
has been built on the waterworks of Broendbyvester, and here the water hardness has been reduced
from an average of 22 °dH to 10 °dH. By 2024, all of HOFOR’s waterworks are expected to be equipped
with softening plants. Since the establishment of softening plants is to be financed through user
payments, the increased costs for the waterworks will result in higher prices for consumers. Therefore,
using proper and effective methods of costing is a fundamental necessity. For this purpose, “Activity
Based Costing” (ABC) is introduced for calculation of cost price. ABC is one of the new costing methods
with an increasing application throughout the world. These methods, when costing, are applied
complex, diverse and specific features. A distinctive feature of this approach is its ability to accurately
diagnose costs and present non-financial information to improve operations and efficiency. In addition,
by applying the ABC method, the organization's unused capacity resources can be diagnosed and
reduced. The adoption of activity-based costing in recent decades has increased greatly in many
countries for costing services, for example in Australia, Ireland, Canada and the Island. Therefore, the
main objectives of this study are:
1) Present a suitable model to determine the cost price of services provided to customers.
2) Compare published rates with the ABC method for remedial services.
3) Present information for standardized performance relationships and performance reviews
(Benchmarking).
4) Provide necessary information for plant construction budgeting, especially Activity Based Budgeting
(ABB). For this purpose, ABC method has been applied at “HOFOR company” to calculate the cost and
savings when replacing hard water with soft water.

2. RAW MATERIAL:

ABC Method Traditional Method