Research On Application Of The Activity-based Costing Theory In ME Company

While the level of social productive forces is improving, a large number of advanced equipments are widely used in modern enterprise production environment. The change of production environment has increased the proportion of indirect costs, which indirectly lead to the traditional cost method no longer adapting to the new production mode of enterprises. This accounting method is not allocating manufacturing cost in a fair and reasonable way; it cannot provide an accurate basis for pricing decisions of enterprises. Companies may fall into trouble due to inaccurate cost information. Activity-based costing suits this new production environment, which is a transform of the cost accounting development, this method is based on the product process and its allocation criteria for indirect costs are multiple. The cost will be reasonably allocated to the product process based on different cost drivers, in this way, the indirect costs can be allocated reasonably and the distortion of cost information can be avoided. Activity-based costing can not only help enterprises get accurate and practical cost information, but also plays a certain role in promoting enterprise management level of decision-making and cost control.This thesis briefly describes the background and significance of the research, meanwhile it lists the domestic and foreign scholars’ research results; furthermore, it introduces the related basic theory of activity-based costing. This thesis uses ME as the research object; the company has a large number of machinery equipments, the high level of automatic in present machining has been realized, however, the company still uses the traditional cost accounting method, this caused problems such as the deviation of manufacturing cost allocation, cost control is not specific enough, cost management implementation does not reach the designated position and so on. Therefore, the necessity and feasibility of the application of activity-based costing is discussed based on the analysis of the current situation of the company’s cost accounting. At the same time, it designs the specific operating cost method according to the company’s unique business characteristics and production process. This thesis selects six kinds of products of the company as the accounting target, the cost of these products is recalculated according to activity-based costing accounting procedure, meanwhile, by comparing the activity-based costing of product cost with the traditional cost method of product cost analysis, it can be observed that there are some differences in product cost using two different accounting methods. The comparison of the two methods suggests activity-based costing can be fairer, it can allocate indirect cost more reasonably and provide more detailed cost information. Activity-based costing is a new method of cost accounting, so the company at the initial stage of the operation should not be anxious for success, but make continuous improvement and perfection in the process, in addition, pay more attention to the cooperation of various departments, so as to ensure the effectiveness of implementation. Activity-based costing can provide a better basis for management decision-making, improve the competitiveness of the company and ultimately reduce costs and increase efficiency.