Research On Improvement Of Traditional ABC By Incorporating Time Estimation

Accurate cost information is very crucial to organization decision-making. Since indirect cost accounts for more, traditional single allocation base has made data collected lost relevance for enterprises' decision. However ABC at its birth has been trying to find relevance. When management implemented this method in large scale of his company, they had to give up halfway because of rising cost and dissatisfaction. In this context, it's necessary to improve the traditional ABC. Difficulties encountered with organizations can be divided into two kinds: general and key ones. The latter means that it's hard to divide resource cost into activities. Management traditionally make a survey to investigate the time percentage spent on activities, and use this percentage as a allocate base. But this is a demanding way, not only is it inconvenient to keep accounts, but also hide potential problems.Scholars have put an emphasis on time as a cost driver. This paper aims to improve traditional ABC based on time estimation. In turn manager responsible for the department estimate two factors directly, one is the cost of per capacity, and the other is the time of per activity. Multiplying the two is activity cost. It's worth noting that the cost is standard, not actual. We find after incorporating time estimation into traditional ABC, it's more convenient to keep accounts and it still can reveal the management mistakes by illustrating a case. Organization of this paper is as follows: Firstly, after introducing fundamental theory of ABC and time estimation, the applying difficulties were presented and according solving methods were mentioned. Then it focused on how to overcome these difficulties by incorporating time estimation into ABC. Finally, application evaluation was made.