Operating Cost Management Application, Product Profitability Analysis In The Paper-making Enterprises

Product profitability analysis based on Activity-Based Cost (ABC) was put forward in western countries in 1990's and the research on ABC in western countries boomed then, too. Due to various limitations, ABC has not been applied widely in China especially in Chinese paper making industry. Following the development of market economy and the enhancement of Chinese reform and opening to the outside policy, China has become the second largest country of paper product production and consumption after US. The severe market competition and the diversified customer needs have made Chinese paper manufacturers pay more attention to product profitability, which involves the reasonable allocation of overhead costs and leads to the question whether ABC is applicable to paper making companies. Therefore there is a need for research and practice on this issue. The thesis reviews the achievements in ABC development by analysing the development of research work on ABC in foreign countries as well as in China and discusses about its development in paper industry application in China. Bases on a case of ABC & ABCM application by a wholly-foreign-owned paper mill, the thesis analyzes and compares the results pr??to and after the application of ABC & ABCM to elaborate that ABC & ABCM application can help paper making company to do costing and cost allocation so as to improve product profitability and provide valuable supports to decision making on corporate operations. By analysing the case study, it is also to prove that ABC&ABCM is applicable to paper making industry and is able to improve and raise the accuracy of overhead costs allocation and lay the foundation for product profitability analysis. It is hoped that the study of this thesis can of some assistance and reference to future application of ABC in Chinese paper industry.