Application Of Activity-based Costing In Production Cost Management Of HK Company

With the development of the market economy,in order to maintain a long-term and stable development in the fierce competition,the company needs to adopt some effective cost management measures to control the cost and enhance the strength of the enterprise.Accurate product information is an important basis for managers to make economic decisions,so the accuracy of cost information is the basis of cost management for companies.The soft packaging industry is an important branch of the printing industry,which is widely used in food and beverage,daily chemical,dairy and other industries.The rise of e-commerce brands has brought great development opportunities for the soft packaging industry.The emergence of new brands makes the demand for soft packaging on the rise,and the soft packaging industry develops towards customization,personalization and digitization.The HK company in this paper,a soft packaging manufacturer,mainly produces amorphous products such as plastic packaging,which is a labor-intensive and low value-added industry.However,in recent years,in order to meet the demand of production,the company has introduced advanced production equipment and the company’s production scale has expanded,resulting in an increase in the proportion of indirect costs to total costs.There is a certain deviation between the current product cost information and the actual cost.In face of market competitive pressure,the company needs to reform its cost accounting methods to obtain accurate cost information that is conducive to decision-making.The traditional cost accounting method has a single allocation criterion that leads to distorted cost information.The activity-based costing method can overcome this shortcoming,and the cost information can better reflect the actual cost of the products consumed.Activitybased costing is based on activities and allocates resources according to cost drivers.The diversification of drivers makes the allocation process more scientific and the cost information more accurate,providing a more scientific and reasonable basis for the company’s operational decisions.This paper firstly studies the theory and concept of activity-based costing,summarizes the experience of practical application of activity-based costing at home and abroad,analyzes the current production cost management problems faced by HK company,and discusses the necessity and feasibility of introducing activity-based costing by HK company.Then,combined with the characteristics of HK company’s technological process,a product cost accounting model based on activity-based costing was proposed,and the product cost information of three representative sample products was calculated.By comparing and analyzing the cost with that under the traditional cost method,it is found that the product cost data information under the activity-based costing method is more accurate.On this basis,the HK company introduced the operation cost management mode and optimized the operation chain to control its production cost and improve its economic benefit.By doing that,the HK company can obtain more actual cost data that provides a scientific basis for the company’s product quotation,product profitability analysis,performance evaluation,product cost control and other business decisions.Finally,the measures to ensure the smooth implementation of activity-based costing method are put forward.The results of the study prove that HK company has achieved great performance by introducing the activity-based costing method for cost management,and that the activity-based costing method can provide companies with more realistic product cost information,which can be applied to the company’s production cost management and operation strategy to achieve effective management of the company’s production costs.