Research On The Causes And Control Of Implicit Costs For Manufacturing Enterprises

Maximize the profit margin is the ultimate goal of all business, in order to achieve this target, all enterprises leaders have been trying hard to find a way to continuously control the manufacturing cost in every mean, while to expand the scale of operation, and to improve the profitability of the enterprise at the same time. By implementing of these management methods, the annual production output volume of many companies have increase dramatically, with some even have several times or dozens of times jump, however, under a circumstances of an ever competitive market, although many companies have certainly expanded in production scale, the profit has little change, and some even worse and somewhat strange phenomenon of doing more with greater loss arise, thus forming a vicious circle of "costs cannot be cut down, profit and effectiveness cannot be achieved, loss is difficult to curb ". How to reduce costs for low-cost profit earning, has been troubling the enterprises how to increase profit at the same time with expanding production scale. In this essay, the cost is divided into explicit and implicit costs. Implicit costs are costs hidden in the total cost of an economic organization, but drifting away from costs under the supervision of financial audit, whose existence is due to the intentional or unintentional behavior of economic organization that cause some hidden future costs and transfer costs, which are the sum of the cost of the future tense and transferred cost. Compare with explicit cost, implicit costs have the feature of hiddenness and potential, but also have magnifying and explosive impact which are inevitable and incalculable. Awareness and control of implicit costs is difficult, which is often easy to be neglected during management process, however, it is a key condition to evaluate a business leader’s performance to be good or bad.This essay will combine relevant theory and fact, through analyzing theory of controlling implicit costs and studying related real cases to help enterprises to well find and control the implicit costs during a project. First of all, from the cost accounting concept and function aspect, it will briefly discusses the significance of cost management and then it will focus on implicit costs’concept, constitutions, characteristics, and reasons to uncover hazards and impact of the implicit costs that bring to the enterprises as well as the severe challenge, through the project failure analysis to a foreign company of Guangdong circuit board industry-Multek Technology (Zhuhai) Co., Ltd.,which can well tell the risks and consequences of implicit costs. Secondly, it studies and investigates aspects of production budget management, internal control processes, human recourses structuring and corporate culture etc. to raise the below points:prevent implicit costs, strengthen budget management; improve internal control processes, establishing, perfecting and effectively implementing the internal control system is the basis of the implicit costs control; scientific human resources and organizational structure is ways of effectively control the implicit costs as well as an organizational guarantee; establishing a good corporate culture to minimize the implicit costs. Finally, by introducing the successful experience of controlling the implicit costs of a project of Multek Technology (Zhuhai) Co., Ltd., the essay summarizes the overall solution of controlling implicit costs to help enterprises effectively control it and gain greater profits, achieve rapid development from a new point of view generally.