On The Impact Of The ABM's Idea On Management Accounting

Since 70's 20th century, the flourishing development of advanced scientific technology cause to the innovation about production organization, and then to the innovation about business management. How to manage strategically concerns to the competitive position of enterprises. According to this, Management Accounting, as a subject combined business management with accounting, is also influenced by the change of economic environment.Activity-Based Management (ABM) appears to be a kind of modern management method. Gradually, ABM becomes a hot point in research to related researchers. Certainly, to Chinese enterprises when entering into WTO, it is active to study business management and Management Accounting. The author, by elaborating others conclusion, tries to probe the application of the ABM's idea and the impact of ABM's idea on management Accounting. This discussion includes points as following: firstly, the application of the ABM's idea to some important areas in Management Accounting, that is, how ABM support business strategic management; secondly, theories are promoted by the development of practice, therefore, another problem is how about the ABM's idea relating to the development of Management Accounting; finally, inquiry to the application of the ABM's idea in Chinese enterprises.1. The application of the ABM's idea to some important areas in Management Accounting.This part includes points as following.(1)Describing the operating process helps to identify the key process and related activities. Usually, it can be said that the key process includes, market research (customer management),product design,receiving orders,buying materials (supplier management),producing,marketing (pricing),collecting revenue, related activities included.(2)Customer profitability analyzing based on activity helps to manage customer strategically. The first step is to calculate customer cost by the principle of ABM. The second step is to calculate the customer life value(CLV).The final step is to classify customers according to their CLV and then to set strategies concerning to various customers.(3)At the stage of product design, target costing based on activity manage cost strategically. The Activity-Based Budgeting(ABB) supports target costing in many areas. Firstly, the target cost of product is product life cycle cost(LCC)calculated with the principle of ABC. Secondly, managing activity help to design manufacturing line reasonably and promote reengineering(RE). Thirdly, ABB can forecast the quantity, acquisition and consuming way of resources accurately and help management authority to acquire and use these resources.(4)At the stage of producing, cost controlling based on activity is necessary. ABM lies in that it indicates the Just-In-Time production system(JIT),the Flexible Manufacturing system(FMS),Total Quality Management(TQM) and Enterprise Resource planning(ERP) to work by activity analyzing.(5)Activity-Based Costing and Activity-Based Pricing (ABP) helps to cut marketing cost and to promote the competitive position of enterprise.(6)Performance evaluation based on activity intends to keep consistence with the operating process. It is illustrated by combining the ABM with Economic Value Added(EVA)and the Balanced scorecard(BSC).Finally, from the logical point—the application of ABM's ideas to some important areas in Management Accounting, and the historical point—the same point between the ABM's idea and the raising of strategic management, a conclusion can be induced: ABM is a kind of modern business management method which is based on activity, focusing on process and support business strategic management efficiently.2. Referring to others points, the author considers the ABM's idea as the key point to construct Strategic Management Accounting. The ABM's idea causes to the innovation of management Accounting research. Such indicates the importance of researching ABM.3. It is necessary and possible to apply ABM in Chinese enterprise. Enlightened by the successful exp...