Application Of Activity-based Costing In Heavy Machinery Manufacturing Enterprises

The momentum that the world manufacturing center is shifting to developing countries like China poses favorable circumstances for these countries to participate in international competition. However, compared with that of other competitors in the world, China’s heavy machinery industry has many problems such as weak technical contracting capability, disperse resources, small operation scale and low management level and effectiveness. Secondly, the competition among domestic enterprises in the same industry is increasingly intense in the condition of syndication, reshuffle, resource integration, readjustment of product structure, promotion of specialization degree, enhancement of manufacturing capability and rapid growth of enterprises. How to survive in the competition of domestic market or even under the pressure exerted by foreign monopolies has become a common problem facing the enterprises of heavy machinery industry.Meanwhile, the product cost structure of heavy machinery manufacturing industry has changed as the manufacturing cost increases while direct labor cost decreases in proportion. In this case, the conventional way of cost calculation through distributing manufacturing cost according to unitary quantity standard is not suitable any more. In the difficult environment, only to implement effective cost accounting and management will help an enterprise get more advantage in competition. The activity-based costing method may solve the imperfection of conventional costing method fundamentally as it is able to improve profit of an enterprise and pave good foundation for cost management of this enterprise by providing accurate and seasonable cost accounting information, improving activity and making decision according to the information it provides and analyzes. Therefore, it is a task of top priority for heavy machinery manufacturing enterprises to introduce the activity-based costing.Taking company D as a model, this thesis studies on the application of activity-based costing in heavy machinery manufacturing enterprises mainly in the method of combining standards and cases. On the basis of summarizing the theory of activity-based costing method home and abroad, this thesis analyzes the basic thought and applicability of activity-based cost, compares the activity-based costing method with conventional costing method and thoroughly investigated into the question how an enterprise would conduct activity-based costing method. This thesis analyzes the problems existing in the basic situation of costing management, and then makes proposal on activity-based cost accounting to company D according to activity-based costing method theory, analyzes the principle, specific content, effect, merits and demerits of implementing activity-based cost accounting in an enterprise, and puts forward measures and suggestions of improvements. All these would be used for reference for other enterprises of heavy machinery manufacturing industry. Therefore, the author of this thesis thinks that it is significant for the company D to practice activity-based costing method. However, as company D began to practice it not long ago, there is still a need of thoroughly investigating into the role activity-based costing method plays in an enterprise in the actual management of this enterprise.