Advantages Of ABC Over Traditional Costing:theoretical Analysis And Empirical Proof

Activity-based costing(ABC)have caused wide attention m both in theory and practice since first brought into the public’s view by Robin Cooper and Robert S Kaplan in the late 1980s.There appeared a hot trend to research the theory and application of ABC in many countries all over the world,and this situation never appeared in the history of cost accounting.Someone look upon ABC as a revolutionary change of cost accounting.However,some of the 1990s surveys found that some enterprises gave up ABC after applying it for a few years.Whether ABC is really superior to the traditional costing became a controversial issue in academia.In recent years,more and more enterprises consider adopting ABC with the exposure of the increasing numbers of shortcomings in using traditional costing.In order to make ABC go further,it is necessary to conduct a comprehensive statement and of ABC’s advantages over traditional costing,and confirm them using actual data.Most domestic literatures discuss the advantages of ABC over traditional costing in a theoretical way,but limited to the difficulties in actual data acquisition,very few literature presents the advantages in terms of empirical evidence.First,this paper introduces the research background and the current situation of the domestic and international research.The paper introduces the costing methods and characteristics of traditional costing and ABC respectively,and launches elaboration of ABC’s comparative advantages from three aspects:cost information accuracy,cost control and operating decision.Then,the paper explores the ways to proof the relative advantages of ABC.After the traditional analysis way fails,this paper suggests a regression model which can test the accuracy of costing methods,and presents the testing procedures and methods both in traditional costing and ABC.At last,based on the 3-year actual cost data of HZ company,this paper conduct regression analysis both under traditional costing and ABC,and analyses the R-squared and t-Statistic.The analysis result shows that cost accuracy of ABC is much higher than of traditional costing.While the cost accuracy can improve performance of companies through affecting cost control and operating decision.So we can draw the conclusion that ABC is superior to the traditional costing.This paper uses a combination method of theoretical analysis and case study,and makes comprehensive use knowledge of accounting,financial management and statistics.Relying on the actual cost data of HZ company,this paper completes theory research,method research and empirical test.This paper completes the process of sublimation by repeated testing from theory to practice and from practice back to theory.The final conclusion is a joint result of logical analysis and verification,and hope the conclusion of this paper has a certain role in promoting the development of ABC.