Process Of Activity-Based Costing Methods Introduction Into ×× Electric Machinery Works And Relevant Cases Study

Man-hour, machine-hour, directly used manpower and materials are taken as the unique standard in cost allocation method in Dongfang Electric Machinery Works to allocate overall production cost. This is also the first part of this thesis. This thesis has also argued the production cost distortion and cost information uncertainty brought about by using such a method. With Dongfang Electric Machinery Works indirect expenditure taking a larger proportion in products costs, the development of customer products diversification needs, individualization need, low-volume purchasing need, furtherly exaggerates the distortion extent on production costs . However this defect can be mended by implementation of activity-based costing. Through the media of operation, activity-based costing combines the generating of expenditure and products costs to reveal the process of costs generating dynamics. Through diversifying allocation standards, it counts the traditional indirect costs into products direct costs. By such a means, the cost attribution can be made clearer, thus the costs information can be made comparatively more objective, reasonable and correct. Although activity-based costing takes the advantage in costs accounting, and is of great importance to corporations' strategies, many disadvantages are unavoidable at present stage of enterprise development. The disadvantages lie as follows: large amount of initial cost, lacking supporting technology, low personal quality, difficulties in choosing operational definition and operational motives, etc. So some presumptions should be taken into the implementation of our enterprises when activity-based costing will be introduced. The implementation of activity-based costing needs advertising, scientific managing system, the support and participation from the top management, and training of interdisciplinary talents should be enhanced. On such a basis, this thesis has stated the process of activity-based costing as well as experiences should be learned in the introduction of activity-based costing method into our enterprises. Sum up it consists of the following steps, correctly verifying costs, and categorizing operations, reasonably setting up activity-based costing accounting system, collecting operating information, utilizing relevant software and measuring off for further development. This thesis has also introduced accounting process of operation costing itself as attachment. Finally, the use of electrical plant operating cost operating cost management, including analysis of production, value-added and non value-added cost, value-added and non value-added cost of the preparation of the report, the use of activity-based costing to reduce costs and use of activity-based costing decision-making.