Application And Practice ABC

In the economic environment of supply exceeding demand, modern enterprises should select products and customers with high profitability, constantly reduce product costs, so that core competitiveness can be achieved, success be realized and an ever-green enterprise be expected. However, the keys to the above lie in the setting-up of accounting and control systems related to cost. Traditional way of cost accounting was to distribute all cost items to different products or services according to the unified standards without differentiating the diversification and complexity of products. In this case, the distribution is carried out in accordance with the proportions of output and time consumption, or preset quota standards of different products. Usually, the result so obtained will not comply with the real situation, not meet the requirements of business operation and mislead the business decision making of such an enterprises.Since the advent of the 80s of the 20^th century, scholars represented by Robert Kaplan, a professor of Harvard University have conducted in-depth and systematic study about costing methods, i.e. Activity-Based Costing, ABC. And such a method is promoted initiatively in the academy. The method takes "resources are turned into products through human activities" as a principle to analyze all operation used by products, so as to further identify the consumption of resources. By doing so, product costs can be accurately measured. Great importance has been attached to this method. And many American companies such as IBM, AT & T and Lucent have already adopted the method. In recent years, some large and medium sized enterprises in China have gradually put it into study and practice.By using the case study method, the paper discusses in concrete terms about the advantages of ABC through the follow-up of courses and specific ways in the process of practicing ABC in a textile enterprise in China, and comparisons with the traditional costing method used before. Through enforcing ABC by the enterprise in the case study, closer result to the real situation has been reached, the accuracy been greatly enhanced in the respect of costing, correct prediction of product costs been made possible and data support been provided for enterprise management and business decision making. On the basis of information obtained from ABC, an enterprise can...