Research On The Application Of Activity Based Costing In EMS

Since the beginning of the 21 st century, with the rapid development of global economy, science and technology changing day by day, profound changes have taken places in the external environment of EMS(Electronic Manufacturing Services).The application of new technology has led to the sharp increase in the proportion of indirect cost, which made traditional quantity-based cost calculation incorrectly reflect product's consumption, and provide wrong information of accounting for the enterprise. In the mean time, with the sharing of information and technology, the expertise can no longer be kept secret in the EMS as before. The products and services have already shown the tendency of "homogeneity". Furthermore, affected by the global financial crisis of 2008, the competition among EMSs have become even more fierce and price has become a key factor in the competition. Under this circumstance, how to control costs effectively has become a vital element for enterprises'survival and development. Therefore, a more advanced cost management method that can provide more accurate information is needed.Activity-based costing (ABC) now has been suggested as the leading method to replace traditional cost accounting systems. Different from traditional systems, in the he ABC system, overheads will be assigned to activities, which creates a great number of cost centers with different cost drivers. They will be accumulated to products in the percentage of usage of an activity. By driver analysis, ABC has the capability to reveal the real cause of costs more clearly and make the processes and activities performed in the organization more transparent and observable, which can precisely estimate the cost of its individual products and services for the purposes of identifying and eliminating those which are unprofitable and lowering the prices of those which are overpriced. Therefore ABC can help enterprises make wise pricing and investment decisions which can bring numerous benefits to the enterprises'future growth and development.This thesis combines the fundamental theory of ABC with the application in a company to illustrate how to use ABC in EMS and its outcome. According to the contents, this paper can be divided into six parts. The first part gives a brief introduction of the research background; then it summarizes the characters of the research harvest inside and outside; Finally, it declares the aim, meaning and methods of the research. Secondly, it introduces some concepts and some related theories of ABC to help readers have a better understanding of this theory. The third part of this article tell us the origin and present situation of EMS;By analyzing the internal and external environment of EMSs, it points out the necessity and feasibility of the application of ABC in EMS. In the fourth part, it provides us the basic production process of EMS and emphasize on the key principles of ABC system design; The final two parts of the article gives an example of a company to illustrate how to use ABC in EMS.By calculating and anal sizing, it clearly states ABC's advantage.