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Study on the Improvement of Activity-Based Costing

Author: LiZuoQing
Tutor: YuXinPei
School: Jiangxi University of Finance
Course: Accounting
Keywords: Activity Based Costing Economic Value Added The cost of capital Value Creation
CLC: F275
Type: Master's thesis
Year: 2009
Downloads: 310
Quote: 1
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Abstract

Enterprise as a profitable organization, enterprise management decision-making must be starting from the earnings. With the evolution of enterprise management objectives of maximizing corporate value recognized following profit maximization, shareholder wealth maximization scientific enterprise management objectives. Value management as the core of the modern enterprise management philosophy is no longer certain functions of the management of the enterprise, but all of the business management, management philosophy is a value-based perspective. Its main objective is to maximize the value of enterprises to safeguard the sustainable development of the enterprise and its control. Activity-based costing (ABC) and Economic Value Added (EVA), respectively, as a theory of cost management and financial management areas are more cutting-edge, has a direct and indirect impact on the value of the management of the enterprise. With the acceleration of technological change, the manufacturing model innovation, corporate cost structure and scope of the changes as well as investors increasingly strong concerns and the pursuit of shareholder value, the existing value management accounting comprehensiveness of cost information with accuracy is more and more powerless. Therefore, to improve the existing costing methods, has become a problem to be solved for enterprise management letter at this stage. Activity Based Costing as an important cost calculation methods play an increasingly important role in product pricing, profitability analysis. However, the operating cost method focuses on operating cost accounting, ignoring the cost of capital, cost accounting is incomplete, inadequate compensation costs, caused by the false performance evaluation results; using activity-based costing method provided cost information, just to ensure that enterprises operating profit achieve, can not reflect the value creation. Introduced the idea of ??the economic value added in order to improve the decision usefulness of cost information, on the basis of the activity-based costing to improve the activity-based costing, the cost of capital is included in the cost management process can effectively compensate for the shortcomings of the traditional activity-based costing. As an advanced method of performance evaluation, economic value added, while emphasizing the concept of the cost of capital, and helped to draw enough attention of the managers of the cost of capital, urging managers to strengthen the control of the cost of capital, improve the efficiency of capital use: On the other hand focus corporate value creation, is conducive to business managers from the enterprise value maximization perspective, relying on comprehensive and accurate cost information to make the right business decisions, helping managers to improve the company's operating results, and to create greater value for the enterprise. This article used the method of combining normative research and case studies, limitations of activity-based costing, by introducing the idea of ??economic value added, to study the improvement of activity-based costing, and mainly consists of four parts. The first part introduces the theory of activity-based costing and economic value added, brief description and evaluation of the activity-based costing and economic value added, the contribution of the activity-based costing. The second part mainly on the theoretical analysis of the economic value added to the introduction of activity-based costing, activity-based costing the problems were introduced, the feasibility of a combination of activity-based costing and economic value added. Depth analysis of the defects of the activity-based costing, studies have shown that the activity-based costing ignore the cost of capital, cost accounting is incomplete; operating cost information and enterprise value creation is not sensitive. Economic value added as a state-of-the-art performance evaluation method, and its emphasis on the cost of capital, and focus on the corporate value creation. The third part introduces the introduction of economic value added to the process and the implementation of the steps of the activity-based costing, job is a brief description of the principle of combination, the method of selection and the specific implementation steps. Final chapter case to demonstrate improved activity-based costing analysis on the one hand by increasing the cost of capital to make up for the traditional activity-based costing, cost accounting is not complete defects, on the other hand the cost information provided on this basis, to help used to reflect the corporate value creation. Although improved activity-based costing, and not through the introduction of economic value added for companies to create value, but it can directly provide more useful information for managers, is based on this information, the decision-makers to make the right and reasonable decision-making, in order to achieve the goal of maximizing corporate value.

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