Feed Industry, The Cost Of Operations And Standards-based Management

Under current both microeconomics and macroeconomics circumstance, one of the most important strategy for survival and growth of enterprise is pricing strategy and smart cost strategy, in addition, cost is also the key element of pricing determine.Profit=Revenue-Cost management and cost control are always topic that throughout enterprise. Now feed industry faces more pressure, first local government sets strict entrance standard through feed industry which require safe, green and environmental feed. Ingredient price fluctuate under current financial crisis which causes more pressure in intention to increase the gross margin through feed industry. Although our country provides more preferential policy such as VAT free for feed sales and feed manufacturing enterprise to enhance feed industry. But with high strict entrance standard and other solution taken by our country that want to ensure our country have safe and meet environment requirement, on the other hand, enterprise need to invest more in manufacturing facility and other technology development to get related certification and license, such this also increase additional burden. In feed industry, the feed of goods sold cover more than 70%, by considering such as sales and administrative cost, total cost cover 80% to 90%.To keep distinct advantage in current difficult competition market environment, it is effective cost management and cost control which can help feed company hold its advantage. So to develop a better cost manageable system is one of the most important task for feed company. With speed development of economic, cost management theory undergo traditional cost management theory, and now is called to strategic cost management. For feed industry, our country criterion is basic fundamental for product quality control standard and that means it is proper for current our standard cost management system. The aim of this paper is to introduce some point of activity based on costing method, and then explore its possibility of syncretizing with our standard cost system. This paper first introduces related traditional cost management, later introduces standard cost system and activity-based cost accounting theory and the related theory of combining of two cost system. And then takes feed company A's cost management practice-combining standard system and ABC system as example to introduce how feed company can effectively manage its cost to achieve strategic objective and also arouses further discussion and improvement.