The Improvement Of CBRC Cost Accounting System

With the globalization of world economic, more and more company faced a deeply press when plenty of competitor enter the market. And with the market segment become breakdown and new technology come into force, the company must find all kinds of methods to reduce cost so as to win the market share and beat the competitor. The company must use the specific cost accounting method to calculate the profit make the cost data can reflect the real operation result and give the top level accurate data for make decision.The main issue in CBRC current cost accounting systemChang Chun Bombardier Railway vehicles co ltd (hereinafter referred to as CBRC) is a joint venture Between CNR and Bombardier Transportation. But it cost accounting method is so odd especially in indirect expense allocating. It use production hours as a allocate factor. It cannot reflect a real image of the product cost. And the cost analysis and cost control cannot be implement as well. The main issue in CBRC as following:a. The part number rules is not fixed so the standard price fluctuateDue to the part number can not fixed and the freight and insurance fee impact the standard price.b. The inventory transaction have not been entered in system timely and impact the cost calculation and stock takeDue to the personal or the system issue the transaction data have not been entered in system reflect the material cost and cannot make the physical amount of the material reconcile with the bookkeeping.c. Indirect expense can not been allocated correctlyIn CBRC using production hours to allocated the indirect expense. Due to all kinds of factors impact the expense and most of them is not relevant with labor hours, so the single factor can not make the costing data reasonable .d. Cost control and performance appraise have no effectCurrent cost calculation methods focus on the manufacture process. In addition, it use production hours to allocate indirect expense it cannot get the reasonable result.It do little in the entire process and performance appraise.The advantage of ABC (Activity Based Costing) methodABC method has been regarded as a mature theory in overseas and in practical isfeasible in CBRC and it useful value as following:a. Provide more accurate and objective data to management levelABC methods allocate the indirect expense based on activities which occurred when manufactured a product. Its core idea is which activity consumed resources it must bear the cost. So it is a very objective way in cost calculations.b. To give a reasonable data for price policy of the product and bids activitiesIt's very limited of a company's resources especially when they investment andbids. The management level know they must get the proper resources in its proper project and make the assets more efficiency. To get further development of company and to win the competition.c. Use ABC result is very helpful for cost analysis and cancel the non-value activitiesBased on the ABC results, we classified the activities as valued added activities and no value added activities. And let the management level know which activities is helpful for the company and cancel the non- value added activities to realize the business goal.d. ABC method make the relevant cost centre pay more attention in it's responsibility.By adopting ABC methods, it is easy to show each cost centre consume how many resources and thus appraised the performance of each department so the operation efficiency is raised.The process design of ABC in CBRC and activity analysisIn CBRC there is two steps to fulfill the ABC method it is cost collect and cost allocation. In cost collect phase, it should collect all the indirect expense in a specific cost stock and then allocate the indirect expense to respective products according the cost drive factor. The main step is as follows: a. Compute the resources consumedb. Definite the activity stockIn CBRC the main activities includes commissioning purchasing and quality inspect stock issue and receipt maintenance , the same resources should be reclassified in a same activity stock.c. Setup activity cost stockTo collect the same nature activity as a group. For example, Material inspect semi-finished goods inspect and finished goods inspect should group to a same cost stock.d. Allocate the consumed resourced to activityThe factor of allocation is depends on the different cost drivers. And the capacity is just based on the data of production line or the logistics material receipt amount.e. Summarized the each cost stock and get the product costAfter allocating the indirect expensed plus material and labor cost then get the cost of sales.Activity analysis can dig out whether the activity is value added or not. When the activity is non-value added the manager should cut the activity. Activity analysis is focus on the activity chains which a company located. The management level should take the supplier and customer into consideration. To enlarge the whole chain and get more value added.The secure of the ABC implementationa. The top level of CBRC giving more support on fulfill ABC methodsThe high level of CBRC concentrate on change the management method to make the company become more attractive. The tough support given by them is the key factor to fulfill ABC methods.b. The Information system in CBRC in more sufficient for ABCCBRC have running the ERP smoothly it can make the cost analysis and cost controlling very reliable. In ERP team it's composed of key user of every department these people can communication very smoothly, it make ABC easily go live with the same way.c. The higher qualification of CBRC is the secure of ABC implementation In financial department of CBRC setup a core team to fulfill the ABC. they have professional people with multi functional skills. These key users in core team know not only cost accounting data collecting but also in method process, and all can get better communication around them.