Study On ABC Application In DZ Company

Foshan Dezhong Pharmaceutical Ltd., Co., located in Foshan, one of the famous"four ancient town"in China, was restructured from a state-owned enterprise into a joint venture pharmaceutical companies in 1998. With a history of a hundred years, it comprehensively passed the state's GMP inspection in 2003; as a medium manufacturing company, it has an output of over 150 million with more than 300 staff.The development of the company and the complication of the market environment call for a continuous improvement in cost management. The tradition cost-management methods fell behind and led to a series of problems: the singleness distribution of cost and expenses had an impact on the result of the product cost seriously, it could not provide the correct decision support in sales, pricing, etc. Realizing the problems, Foshan Dezhong Pharmaceutical Ltd., Co. set up a special cost management group and Commissioned a consultancy guidance, adopted the method of ABC(ABC, short for activity based cost) to work on and manage the cost. As a main member of the group, the author expect to provide helpful guidance to application of ABC method with rich experience in cost management and a knowledge of the industry engineering.ABC method is a kind of cost calculating and managing method, which takes operating as indirect object of summarizing and collecting; by determining and measuring resource activity factors, it summarizes and collects resource costs into operating; then by determining operating activity factors, it summarizes and collects costs into products. Dislike the tradition method, which distribute indirect costs singly by manpower or output, ABC distribute costs through two phases, from resource into operating and operating into product cost; the multivariate distributing method transforms distortion of product cost and the strategic decision error . The necessity of meticulous analyse into operating and cost in ABC requires a highly-involved data collecting system to provide all data, which is usually solved by a certain software. As a medium company, DZ is limited in software developing ability and the developing cost; therefore, it leads to another problem to the cost group how to better apply ABC.After particularity research and communication with experts, the cost group get the correct ABC concept. By Principle of PALEITUO, they make intensive analyse into key operating and cost; in this way, they devote 20% while getting 80%. In addition, to predigest the work further, in some similar operating, they make adjustment in weighting modulus according to their proportion or they setup sustaining degree proportion to operating to operating or to products. It makes ABC applying available in DZ under relatively limited condition.Under such ABC guidance, the cost group apply ABC method in DZ. After analyse to the data in the past one year, the group set up DZ's ABC model after investigation and absorption of some ABC tool, they add up and distribute data and calculate product cost according to the model requirement.The different analysis to result provides a wide range of environmental decision-making. It provides resolusion to the problems confronted by DZ and the more complicated environment. During almost two years after the model was set up, DZ has made data forecast accordingly, and got cost forecast of the past two years. All those important support are helpful to company management. The applying of ABC method not only helps the author in cost management, but also provides further knowledge of ABC concept and the importance of cost management to a corporation.The assay is made up of five partsChapter 1, introduction, including the background and the meaning of the topic; the present situation and the existed problems of the enterprise; the main content and the method of researchChapter 2, ABC theory, including the ABC concept and feature, cost management and the history of ABC, the feasibility of applying ABC in the medium and small corporations in our countryChapter 3, applying ABC to DZ, including the setup of a calculating model in accordance with accountant logic of ABC; the analyse of expenses and operation of DZ, the ABC and distributing, and the product cost under the guidance of the ABC methodChapter 4, result, solution and suggestion of applying ABC to DZ, including analysis of cost calculating result, analysis and suggestion of support to various decision-making environment.Summary and expectation...