Make Or Buy Strategy Analysis Based On ABC For Company M

With 30 years of vigorous development, China’s automobile industry has transformed from product first into the cost first. Effective and reasonable cost control has become an important factor in determining the core competitiveness of the auto companies. For manufacturing parts, there are two basic ways to get: made in house and purchased. However,along with the auto industry specialization, whether made in house or purchased is a problem frequently encountered in auto companies.When the parts can both be made and purchased, only way is that companies need to make decisions on the parts to get from the lowest cost. With the cost which support for production, sales and management overheads increasing proportion of larger, traditional manufacturing cost analysis which bases on the analysis of the direct costs has been unable to meet the effective cost analysis, this would be distorted and even lead to wrong decisions.Activity Based Costing(ABC) can provide a powerful data support through products,operations, rational and efficient allocation of resources and analysis of indirect costs for the company’s decision.In recent years, international car giant as US three big car group General, and Ford, and Chrysler, France Peugeot Citroen, Germany BMW, and some famous auto parts Enterprise US TRW, and France Faurecia, have internally set cost analysis/cost engineering post, the purposes is through ABC, on enterprise needs homemade and the purchased of parts for in-depth of cost analysis, to obtained real cost, internally for cost optimization, externally for cost negotiations, eventually achieved enterprise itself and subordinate supplier of total win.This paper draws on the theory study of activity based costing in China and abroad, with lack of activity-based cost method is applied in the domestic study on self-buy decision case,established under the ABC of homemade and purchased parts costing model. Through on homemade purchased three species typical situation of introduced, combines M company of products status, obtained has job cost method applies on M company’s judge, which respectively on M company of blow molding products homemade and purchased two species programme of cost motivation for analysis, using costing model calculation out corresponding of cost for compared, obtained conclusions that should homemade A parts,provides powerful backup for managers’ decision, thus improve related field of competitiveness of M company, also provides the same industry for parts made of outsourcing decisions with some references.