1. Activity based costing and ABC costing are synonyms. They are quantitative management methods that use mathematical statistical methods to make statistics, arrangement and analysis, grasp the main contradictions, distinguish the key points from the general ones, and adopt different management methods according to the main characteristics of the economy and technology of things.
2. Application Case An agricultural machinery factory is a typical state-owned enterprise, with a production based on sales, multi variety and small batch production mode.
3. Under the traditional cost method, the manufacturing expenses exceed 200% of the labor expenses, and the cost control is ineffective.
4. Therefore, the enterprise decided to implement the Activity Based Costing.
5. According to the technological process of the enterprise, 32 operations and the operation drivers of each operation are determined. The operation drivers are mainly labor hours, and other operation drivers are transportation distance, preparation times, parts types, orders, machine hours, customers, etc.
6. Through calculation, we found the cost distortion of the traditional cost method: the maximum difference rate reached 46.5%.
7. According to the information provided by the activity based costing method, in order to strengthen cost control, target costs are formulated for each activity, so that target costs can be refined to teams and groups, increasing the effectiveness of cost control.
8. Through the analysis of cost information, it is found that production coordination, inspection, repair and transportation operations do not increase customer value. The executors of these operations belong to a branch factory, but the personnel are distributed in each workshop.
9. Through job analysis, a large number of human resources are found redundant.
10. According to the analysis, half of the staff can be cut and the related resource expenditure can be reduced.
11. The analysis also shows that transportation operations are provided by each workshop separately, but there is surplus capacity. Centralized management of transportation operations can reduce three or four forklifts.
12. In addition, correct cost information also has an important impact on sales decisions. According to the activity-based cost information and market conditions, the enterprise revised the prices of some products.
13. The revised product price reflects the cost of the product more truly and has stronger competitiveness.