Research On The Application Of ABC In J Branch Company Of T Insurance

Activity-based costing is an advanced cost calculation method and cost management theory which originated from the western country. Its basic idea is that the product consumes the activity, and the activity consumes the resource, and it focuses on activity, first distributes the costing of resource to activity according to the resource driver and then distributes the activity cost to the production and service according to the activity driver. Compared with the traditional cost method, the activity-based costing method can scientifically allocate the indirect cost.Activity-based costing initially is widely applied in manufacturing, and now also gradually adopted by the banking and insurance industry, such as the Citicorp and the Canada Clarica Insurance, etc. In the insurance company, the indirect cost takes a large proportion in the overall cost, and the products are diversified, therefore it's difficult to accurately allocate the indirect cost to each kind of insurance. Now the traditional cost method uses the unique quantity standard to allocate the indirect cost, which will cause cost distortion. Activity-based costing uses diversifying allocation standard to distribute the indirect cost, which will improve the accuracy of cost accounting, so the insurance company should introduce the activity-based costing method. How to do that? This article will take J Branch Company of T insurance for example to explain how to apply the activity-based costing in the insurance company.First, this article gives a comprehensive and systematic summary of the basic theory of activity-based costing, including its generation and development, its basic concepts, its theoretical foundation and basic procedures, etc. Then, the article points out the problem existing in the current cost accounting method in J Branch Company of T insurance, which distributes the indirect cost based on premium income and will cause the product cost information distortion. By analysis, the roots of the problem are that the standard of distribution used in this method can't explain the incurrence of cost, and the products of insurance are diversified. Then based on the basic theory of activity-based costing, the article demonstrates the necessity and feasibility to introduce activity-based costing in J Branch Company of T insurance, and explains the benefits for J Branch Company of T insurance to introduce activity-based costing.Then the article designs the application of activity-based costing in J Branch Company of T insurance, including the initial preparation, data collecting and the implement steps.In the initial preparation, the business process of J Branch Company of T insurance is divided into ten activities, the resource is divided into six types, and the cost drivers are chosen based on the availability of data and the rationality. Collecting data should consider the integrity, authenticity and timeliness of data and uses the following methods:issuing questionnaires, interview, manual accounting and extracting from the data system. Finally, the article analyses the case of J Branch Company of T insurance, which applies the activity-based costing, and compares it with the original method, then draws conclusions.