Activity-based Standard Costing System

The standard costing system was criticized by Johnson and Kaplan in their dissertation"Relevance Lost: The Rise and Fall of Management Accounting", which was published in Harvard Business School Press in 1987, they thought account information which is provided by the modern cost system has been lost its relevance and costing has been out of control. They suggested brand-new revolution of the costing system is necessary to adapt the new operating environment, which has been changed to be more complicated and competitive because of the diversity of customer demands.Activity Based Costing has been considered as new method to improve the accuracy of costing information. In fact, you can discover the relation between consumption of resource and the cost of product through activity, which consumes resource and is consumed to produce products. Although ABC has its obvious merits, it hasn't been adopted widely in all over the world because of the enormous cost of collecting the real time costing information of activity.In view of the dilemma of the obsolescence of standard costing system and the hardness of putting ABC into use, I think it is necessary to improve traditional costing system viewed with activity. We can keep using the wide range of foundation of standard costing system, and establish a series of rational standards based on activity. In this way, we can decompose the target of enterprise into assignment of everyone, which can motivate the staff to work actively to decrease cost and improve administration eventually.The dissertation is divided into five parts as follows. Firstly, the awkward situation of both standard costing system and activity-based costing is paid more attention. Secondly, we find that the amalgamation of standard and activity-based theory is inevitable by analyzing their merits and shortcomings. Thirdly, and it's the most important part also, telling us how to amalgamate activity-based theory into standard costing system. Finally it is necessary to evaluate the application future of the new costing system, which is in essence a developing style of standard costing system in new environment.Certainly, there are something should have been discussed more intensively in this paper. As we all know, enterprise strategy is important for its development. So the activity-based standard costing system should be applied in the light of enterprise strategy. On the contrary, I don't pay much attention to strategically management because of the vision of activity-based, which is emphasizing internal management. In addition, the listed cases are a little bit simple to manifest how to use the whole system in practice.