What Is the Connection Between Activity-Based Costing and Activity-Based Management?

Activity-Based Costing Management (ABCM) is a new type of centralized management method based on the activity-based cost method for the purpose of increasing customer value and increasing corporate profits. It finally calculates the cost of the product by confirming and measuring the operation and operation costs, and at the same time deepens the cost calculation to the operation level, tracks and dynamically reflects all the operation activities of the enterprise, and performs cost chain analysis, including driver analysis, operation analysis, etc. Enterprise decision-making provides accurate information; guides enterprises to effectively perform necessary operations, eliminates and streamlines operations that cannot create value, and thereby achieves the goal of reducing costs and improving efficiency.

Activity cost management

Activity-Based Costing Management (ABCM) is to improve customer value, increase

Activity-Based Costing Management (ABCM)

Understanding and mastering the accounting elements of ABCM is the basis for mastering the knowledge of production activity cost management. Established to carry out activity cost management

In the process of carrying out activity cost management, enterprises must implement step by step in accordance with their actual conditions. However, there are quite a lot of common factors in the application of different enterprises. We summarize them into the eight implementation steps of activity cost management. In the implementation of production activity cost management, focusing on innovation and flexible application based on these eight steps is the key to the success of ABCM.

Although the implementation of ABCM in different industries, different economic and technological conditions, and enterprises of different sizes has its own characteristics, according to the basic principles of ABCM and the implementation experience of Western companies, the implementation of Chinese enterprises should generally follow the following procedures.

ABCM regards work as the starting point and core of cost management. Compared with the traditional cost management centered on commodities or services, ABCM is a profound change and a qualitative leap.

1. Adapt to the objective requirements of the new economic and technological environment. With the acceleration of the global economic integration and the internationalization of capital, science and technology are developing rapidly in the direction of informatization. The diversification and individualization of market demand, the automation, informationization, and complexity of the manufacturing system of modern enterprises The current irreversible megatrend. In this new economic and technological environment, if the direct and manual allocation of manufacturing costs, which are increasingly smaller in the cost of commodities, continues to be used, it will inevitably lead to serious distortions in the cost information of commodities. Then mislead the company's strategic decisions.

The significant difference between ABCM and traditional cost management is that the company is regarded as a collection of a series of tasks designed to meet the needs of customers. The value of the company's products is formed on each task and is ultimately transferred to the customer. Value Chain. As a result, the focus and focus of cost management has been shifted from traditional "commodities" to "operations", with operations as the object of cost allocation. This can not only scientifically and reasonably allocate various manufacturing costs, provide more objective cost information, but also Job analysis, tracing the source, continuously improving the operation method, rationally configuring resources, and achieving the goal of continuous cost reduction. Therefore, ABCM can well adapt to the objective requirements of cost management in the high-tech economic and technological environment.

2. Conducive to strengthening cost control. Since the 1980s, market competition among modern enterprises has become fierce. In line with this, corporate products usually adopt a multi-variety, personalized, and small-batch production and operation model to meet the changing needs of customers. As a result, the traditional cost management with "commodity" as the core and starting point, and the focus on the analysis and control of the difference between standard cost and actual cost, has become increasingly difficult to adapt to this new, dynamic, and unstable production and operation environment.

ABCM takes the cost of operations as the object, focuses on the completion of each operation and the resources it consumes, and provides relevant information required for cost control in a timely and effective manner on the basis of cost drivers. This can greatly enhance the cost awareness of management staff, and set up a cost control responsibility center based on the operation center, directly link the rewards and punishments of operating employees with the cost control of their operating responsibilities, and give full play to the enthusiasm, creativity and cooperation spirit of enterprise employees, and then achieve The purpose of effective cost control.

3 Conducive to improving the market competitiveness of goods. With the development of social production and the integration of the world economy, market competition among modern enterprises has gradually become more intense and international. However, China's traditional cost management model only focuses on the cost management related to the production process after the product is put into production, and ignores the cost management of product development and design before it is put into production. This has become increasingly difficult to meet the needs of contemporary social and economic development, which has greatly hindered the Increasing the competitiveness of corporate commodity markets.

ABCM can well adapt to the development needs of modern enterprises in the fierce market competition. From the beginning, it paid special attention to product design, research and development, and quality cost management. Limited enterprise resources, constantly improve the product design, process design, and the composition of the enterprise value chain, so as to improve the market competitiveness of enterprise products.