Research On Application Of Activity-based Costing In Chinese Patent Medicine Manufacturing Enterprises

Chinese patent medicine manufacturing enterprises which are closely related to people’s livelihood problems are facing tremendous pressure to survive and develop in recent years. The challenges which are from market competition, the external policy restrictions which are must be faced with and are virtually impotent to contend against, and difficulties that transfer risks along the industry chain, make their profit spaces narrowing again and again. In a short period of time, we can not change the impact of these external factors. In order to improve the enterprise’s profit and to win the chance to live, the enterprise must focus on internal factors, strengthen internal cost management and strengthen cost control ability.With the development of society and economy, the progress of production technology, the introduction of advanced equipment, the reduction of traditional manual, the cost structure of Chinese patent medicine manufacturing enterprises presents new features, indirect cost proportions gradually beyond the direct cost. And the traditional cost accounting method which is now widely used is more and more unfit for the new features of the cost structure and is increasingly unable to meet the requirements of enterprise cost accounting, making the cost information serious untrue.In the 80’s of last century, Activity-based costing is introduced to our country. Activities establish causal linkage between resource cost and cost object. It is very good to overcome the problems that allocating the indirect cost by traditional cost accounting method. Activity-based cost is combined with cost management and it considers all the processes of the enterprise operation, which is beneficial to activity management and production decision in a higher lever.This journal focuses on the activity-based costing which is applied in the Chinese patent medicine manufacturing enterprises standing on cost management. First of all, on the basis of the related research by the domestic and foreign experts and scholars, it will demonstrate the necessity and feasibility that Chinese patent medicine manufacturing enterprises use activity-based costing combing with internal and external environment. Then, it will calculate the production cost of JN pharmaceutical company according to the specific implementation process of Activity-based costing and divide resources, activity center and the cost driver. On the basis of the company’s real situation and relative data, it will get the product cost step by step. For the perspective of enterprise activity management, it will analyze the results of the case and optimize the operation chain. Finally, it will summarize the problems of activity-based costing and propose solutions..