Discussion On Applications Of Activity-based Costing In China's Telecom Enterprises

With the continuous development of the telecommunications market reform and the competition intensifies, the varieties of telecom enterprise products are increasing, network coverage is expanding constantly, indirect expenses cost as the proportion of the total cost is increasing constantly, so the measurement and management are more complex, objective and reasonable measurement and effective management for telecommunication product cost has become China's telecom enterprise facing a difficult problem. The cost of objective measurement and management needs some effective cost accounting method, the traditional cost accounting method can not accurately allocate indirect expenses to specific products or services, the cost data has serious distortion, which will seriously affect the financial decisions of telecom enterprises and investment decision of investors, so this paper will introduce a new kind of cost accounting management method named activity-based costing method to China telecom enterprises. The activity-based costing method helps to improve precision of telecom enterprises, obtain the real cost of detailed information, promote cost control and budget management, complete transformation for business flow and optimization of products and services, analyze the profitability of all kinds of products, help enterprises to formulate the reasonable telecommunications pricing strategy, improve the manager's decision and analysis ability, also can promote telecommunications enterprise human resources and property of resource allocation efficiency, pay attention to combination of beforehand control,course control and afterwards control, establish and improve the internal management mechanism, strengthen market competitive advantage for telecom enterprises.The activity-based costing is a kind of cost calculation method, which bases on homework for accounting, it can allocate indirect expenses to products, services and customers more accurately. The activity-based costing method origined in America in the 1980s and spreaded rapidly in China in the 1990s, this method overcomed effectively the defects of cost information distortion caused by uneven distribution for indirect costs in traditional cost calculation method, so this method not only gets the agreement in theory, also is used widely in practice from the initial manufacturing industry to telecommunication service industry now. The relevant literature to application of the activity-based costing method in China telecom enterprise is less, most literature for the activity-based costing method in Chinese telecom companies have not established a set of scientific and reasonable application system, on the basis of the research on the activity-based costing method,this paper has a new analysis of the application in China telecom enterprises, which provides theory basis for application to the activity-based costing method in telecom enterprise and analyze telecommunication cost accounting and management of telecom enterprises from the angle of activity-based costing and system designation in detail for activity-based costing.This research mainly adopts the standard with the case study of the method combining the activity-based costing method in China telecom enterprises, the paper includes six parts'contents roughly:the first part is the introduction to the theory of activity-based costing, which introduces theoretical basis of the activity-based costing, the basic principle and concept, characteristics, the activity-based costing method includes three theoretical basis:cost drivers theory, value chain theory and the theory of competitive advantage theory, the application of these involves with the knowledge of economics. The second part elaborates the application in detail of activity-based costing method in China, including the achievements and the main obstacles of the process, describing the key factors which should pay attention to successful application for activity-based costing method, the key factors contail the internal management attitude in enterprise, information system, and the advantage financial system and the integration of the relevant accounting standards. The third part of the activity-based costing method is analyzed the necessity and feasibility of application in the Chinese telecommunication enterprises, separately from the internal and external environment of enterprises' development. The fourth part is the core of this chapter, the emphasis on telecom enterprises is the system desig of activity-based costing, which introduces how to apply activity-based costing in telecom enterprises, including five aspects:the design of accounting objects, the design of resources and resource drivers, the design of homework and homework drivers, the procedures of activity costs, the analysis and optimization of activity, these five aspects provide the reference value for the next chapter in the case. This is the fifth part of the case analysis, which cites China railcom company as the case of applying activity-based costing, this part analyzes the application background of China railcom company for applying activity-based costing and its concrete application process. The sixth part is the conclusion, the paper points that the telecom enterprises should consider the inner and outer factors for effective application of the activity-based costing, the application of activity-based costing requires to improve and complete constantly.