Activity-based Costing In The Civil Aviation Industry In Applied Research

The high speed economy development after the World War 2 has deeply changed our life, the buyer's market replaces the seller's market, we live a better life with more abundant goods. At the same time, the manufactures are facing more drastic competition. They have to change their behaviors in all aspects, especially in management. These also make the conventional accounting system face a great innovation. ABC is an outstanding innovation in this field.As a new cost accounting and cost management system, the application of ABC (Active Based Cost) is widely adopted in developed countries. However, it is still under discussion in China. While some research has been done on the application of ABC in Manufacturing, the ABC in Service sector seldom has been discussed. In somebody's paper, who and who have done some fundamental research work on the application of ABC in Railway transportation. In the author's opinion, the ABC should be applied in Civil Aviation industry since it is the most high-tech and complicated industry in the transportation sector.The conventional cost accounting method has deep crisis in cost information relatively offering and cost management effectively carrying on. The ABC provides a much better solution for these problems than the conventional method. Developed in decades of years, the ABC is now widely applied in several phases of management such as cost accounting, cost control, products design, and performance evaluation.The discussion of ABC methods focuses on the Civil Aviation industry. In the beginning, the author illustrates the deficiency of conventional cost accounting and the problem caused through a case study. Afterwards, the author reviews the history of ABC and explains the internal logic of the ABC method. Then, the author discusses thefeasibility to apply this method in Civil Aviation industry. In the end, the author analyzes some applications of ABC in cost accounting and cost management and discusses some relative issues in application.The paper can be divided into five sections.The first section is about the problematic issues of the conventional cost accounting. The author calculates the benefit of a flight course with the conventional cost accounting and the result distorts the relationship between cost and benefit. Such distortion will result in wrong decisions in the management. And this is the problem that ABC is designed to solve.In the second section, the author reviews the history of ABC and indicates that it is the diversified demand of the consumers and the development of management technology that makes the ABC prevail. Then the author introduces the basic technique of the ABC. ABC includes three parts, which are ABC accounting, ABM (active based management) and the application in SCM (Strategic Cost Management). That "the products cost activities and the activities cost resource" is the basic logic of this system.　In this introduction, some charts and diagrams are incorporated to make the paper more understandable. Besides, since the ABC has its own cost as a management system, the organizations should do some cost-effective analysis before the application of ABC. In the third part, the author finds that the uniqueness of the cost structure of the Civil Aviation industry are its high proportion of fix costs, its high proportion of span term cost and its mixture of passenger costs and cargo costs. Based on such findings, the author states that the conventional cost accounting suffers big flaws in collective cost distributing under such circumstances. Moreover, the Civil Aviation industry has not only high risks in transportation costs but also in financial costs. Therefore, the author claims that more accurate cost information and more efficient management systems should be applied in Civil Aviation industry. With the usage of the actions as the object of costaccounting and the media of cost control, ABC makes those management tasks possible. Nonetheless, the recent development of management technology in Civil Aviation...