Research On Activity-Based Budgeting: A Cost Management Perspective

Focusing on the orientation of cost control, activity-based management has been attached importance by the academic and practitioners. As the further research into ABM, Activity-base budgeting has presented itself to human eyeshot. However, the theoretical model of activity-based-budgeting encountered the severe challenge of reality. In allusion to this challenge, the thesis puts forward its immature view points on the construction of activity-based budgeting system based on the Activity-Based Management theory, using normative research method. The paper consists of four parts:To begin with, the first part makes an analysis into the status quo of research and application of activity-based budgeting. In addition, the main question of the thesis is brought forward that the theoretical idea has encountered the doubt from the reality. For the change of environment, the functional-based cost system upgrades to the activity-based cost management. The technical bottleneck is the limit of budget's function. However, it doesn't mean that budgeting is out of date, better budgeting is its true approach, of which ABB is brought forward. From consultants'concept of ABB, to the model of ABB by academic community, there existed a relative climax on the research of ABB. But when applied into practice, theory was encountered by the practice's oppugn. The Scottish-based brewery is one case, of which the theoretical model ends up with a failure for its modeling, operation and groundwork. We find that the logic, culture and technique are the significant factors to the failure of the theoretical model, which in turn, gives edifications for our research. Based on the edifications, the second part tried to form the framework of ABB. First, the paper makes"cost control"as the orientation of ABB, aiming to put strategy into practice and carry out continuous improvement. Then an analysis of the process of ABB is made: by the focus of strategy to activity, unit activity cost budget and variance analysis, we can take attention to the"spot (activity)","thread (activity chain)"and"cover (the organization)". Finally, a relative detailed discussion is made on the developing and controlling approach, the key to which are the constitution of unit activity cost budget and a variance-analysis system made up of driver and cost attribute dimensions, as well as the analysis into activity chain and organization. As Chairman Mao clarified that, in order to gain the accurate knowledge, a two-stage approach of cognitive process is needed. As long as the thesis is concerned, part 1-2 is"practice to theory"'; for the accurate cognition, the second stage of cognitive process is imperative, which is"theory to practice". Part 3 is just following this rule.Part 3 makes an application of the above theory into the Apparatus-Based ABC of Luo Yang Cooper Group. We find that there exist three kinds of shortages in the apparatus-based ABC, including the absence of control benchmark, the disadvantage cost accounting, and lack of variance analysis. For the purpose of cost control, the organization needs to introduce ABB as its control benchmark and better the accounting method; variance analysis system needs to be set up as well. By developing unit activity cost budget and variance analysis, a scheme of improving is made to Luo Yang Cooper Group. However, as mentioned in the article, with the cognition of the imperativeness to bring theory into practice, practical resistance prevents our action from following the research logic, a so-called pity for our research.The research into ABB cannot be accomplished in an action, with research methodology and profundity as its future struggling direction. Meanwhile, the support by the practice community and the focus by the academic community are the guarantee of the research and application of ABB.