The Application Of Activity-Based Costing In Engineering Project Construction Cost Management

Construction sector is an important mainstay of national economy, which is featured by intensive labor, low degree of automation, low entry barrier, and fierce competition. Cost management problems such as the difficulty to control actual cost accurately, the difficulty to optimize internal value chain exsited in almost all construction enterprises. Currently, traditional cost calculation and management approaches are still employed in most construction enterprises. However, as great changes having taken place in production environment, new management pattern emerging, and overhead expenses increasing continually, the disadvantage of traditional cost calculation approach is deepening increasingly.Activity-Based Costing is an advanced approach of cost accounting and cost management, which focuses on activities and takes cost drivers as media. Tracing activities dynamically, it chooses proper resource drivers to confirm and account the resources consumed by each activity. Then basing on the amount of activities, ABC attribute activity costs to products. The primary principle of ABC is that products consume activities and activities consume resources.In this dissertation, the defect of traditional cost acconting is analyzed which elicits the concept of ABC. The basic theory and implement process of ABC are then introduced. Regarding the cost of engineering project costruction as the object of study, the fisibility of applying ABC in engineering project construction is analyzed. Then basing on the bill of quantities, by analyzing the character of the structure of bridge, construction produts, activities and cost drivers are defined, so a complete activity system is established. Making comparison between the result of traditional cost accounting and that of ABC by a actual engineering project construction, the accuracy of ABC is verified.The advantage of ABC lies not only in the accuracy of cost calculation, but in advanced Activity-Based Management. From the aspect of cost planning, cost controlling, cost accounting, cost analyzing and assessment, the implementing of ABM is discussed. Finally the difficulty of implementing ABC and ABM in engineering project construction is expatiated, and solutions and suggestions are put forward. It's hoped that these suggestions can be taken care of , and that ABC can be applied into reality engineering project construction.