# How Traditional Costing Methods Hinder the Development of Modular Product Architectures
## 6 Conclusions  
This study set out to investigate how traditional costing methods hinder the development of modular product architectures. Through a structured literature review, the gap between the research fields of MA and IOM is highlighted. This review revealed that only a few studies exist that address the impact of traditional costing methods on the development of modular product architectures, owing to the challenge of making accurate and comprehensive quantitative cost assessments as a result of product variance. These studies have disclosed that traditional costing methods fail to account for indirect costswhen evaluating the cost benefits of modular product structures. However, the literature did not clearly define the underlying reasons as to why the management costing methods failed. Thus, a hypothesis was developed, suggesting that defining abstraction levels based on current product structures could expose challenges in accurately allocating product variance costs throughout their life cycle. The literature addressing the modularity effects was categorized into three different abstraction levels based on their impact. This provided us with a comprehensive overview of the life-cycle phases and the abstraction levels at which specific modularity effects are currently assessed, whether at the product, subsystem, or component level. The findings revealed a tendency to quantify the effects of modularity on a product level in four out of the five life-cycle phases; e.g., there were more than twice as many instances on the product level, compared to the component or subsystem levels, for the development and production LCPs. These findings suggest that current costing methods are unable to account accurately for the economic benefits of common parts and modules when conducting modularity initiatives. The costs incurred are tied to the lower abstraction levels of subsystems and components; therefore, the current practice of allocating indirect costs at the product variant level may result in significant inaccuracy in indirect cost allocation to product variants. This paper's contribution lies in its interpretation of the results, which concludes that product-level cost allocations do not provide an adequate level of accuracy for making informed decisions regarding modular design. Thus, it can be suggested that a more refined cost allocation system is needed to provide a more accurate cost basis on which product developers can make informed decisions for modular product designs. Hence, this study contributes to our understanding of how traditional accounting methods hinder the development of modular product architectures by revealing the level of abstraction at which current costing methods allocate costs, which may result in incorrect or inaccurate indirect cost allocations. This suggests that cost management remains a critical factor in modular product development and that a new approach to allocating costs starting on a lower abstraction level might be essential to create accurate costing models for informed decision-making on product design. Additionally, this can serve as a guiding principle for practitioners seeking to implement a modular product strategy. The cost transparency related to products across all life-cycle phases should be improved at both direct and indirect cost levels by partitioning product structures into evaluable units, providing a basis for understanding the effects of design decisions and the derived product variety across the product portfolio. Furthermore, it is found that no generalizable or holistic costing tool exists for quantifying the economic benefits of modular product family design across all product life-cycle phases [10; 18]. This work does not explicitly propose a solution for resolving this challenge, nor does it offer a solution for refining existing costing methods; it simply provides a new perspective, which could be the first step toward future research at the intersection of MA and IOM.