New demands are being made on product costing methodologies by the automation of both design procedures and manufacturing processes. The former requires costing methods which are integrated with CAD systems, while manufacturing automation invalidates traditional costing methods. Recent developments such as Activity Based Costing (ABC) improve costing accuracy but have limitations of their own. We develop a procedure for correcting ABC's primary deficiency, its neglect of capacity costs. A framework is developed for identifying manufacturing environments where ABC's limitations could lead to distortions, and a model is developed to properly account for capacity costs. Implementing this model requires the involvement of nearly all functions within a company, and these changes in a firm's organizational structure are described.