The Application Research Of Activity-based Costing In Company D

Under the circumstance that the market competition is increasingly fierce, many large equipment manufacturing enterprises gradually introduce and use advanced equipment to improve their production mode so as not to be eliminated by the market, especially for high-tech manufacturing enterprises of nuclear power equipment which need advanced machinery equipment more to improve their product quality and guarantee their product safety in the production process. All these introduced equipment are highly automated machinery equipment without exception, which resulted in the decrease of the direct labor cost ratio but the rise of the indirect cost involved in the machinery equipment when the product cost is analyzed according to the traditional manufacturing cost method. On this occasion, the financial information provided through the manufacturing cost management method that is under the premise of relatively small proportion of the indirect cost in the total cost may not be accurate, which may influence the corresponding enterprises to make the wrong production decisions. As an advanced cost management method, activity-based costing is used to analyze the production process of products first, and then subdivide the production process into various operations, and then allocate the indirect cost of products to different operations through the resource drivers, and finally select appropriate activity driver to distribute the indirect cost in the operations to products. In the process of cost allocation, enterprises can obtain financial information and non-financial information about product cost so that they can conduct cost management better and make production decisions in favor of the enterprises.Therefore, it was attempted to introduce activity-based costing to Company D in order to support such nuclear power equipment manufacturing enterprises like Company D to improve the level of cost management.Firstly, it was started from the background of nuclear power equipment manufacturing industry where Company D is, and the current cost management situation and existing problems in cost management of Company D were elaborated. The main problems were the limitation of cost management, unreasonable indirect cost allocation and so on. Secondly,based on these problems, the necessity and feasibility of the implementation of activity-based costing in Company D were analyzed. Thirdly, the operations in the nuclear power productionprocess were divided, and nuclear power products were regarded as the goal of cost accounting to specifically design an application scheme of activity-based costing for Company D. In addition, a comparative analysis was conducted on the cost information under activity-based costing and the cost information under the current cost method in order to provide reference information for the production decision-making of D company’s products.Finally, it was pointed out that the cognitive deficiency of the decision-making level and the activity-based costing required high-quality staffs were the main difficulties that would be faced before implementing activity-based costing, and relevant countermeasures were put forward. Through the case study analysis on Company D, it was believed that activity-based costing should not be limited to the cost accounting of enterprises, but should be considered as a strategic thought of cost management and the financial information and non-financial information obtained from the analysis process of activity-based costing ought to be applied to the production decisions of enterprises.