Cost Accounting: The Application Of Activity-Based Costing In Hongkong

No matter how to define device management, the purpose is to meet the needs of production.

When we expect to achieve production more quickly and smoothly, the requirement for equipment management will also be higher and higher.

To achieve this goal, either rely on equipment maintenance management personnel to increase, or through technical pformation, information technology to achieve, or through management optimization to give full play to the existing personnel and equipment capabilities.

When it comes to management optimization, it must be related to assessment. Management is the optimization process of resource allocation, and also the formulation and implementation of management authorization and supervision (assessment).

The following three aspects are used to formulate assessment details:

First, equipment management performance appraisal;

When the equipment condition is not good, the quality, production efficiency and safety will be affected. In other words, when the quality, delivery time and safety problems occur, we will find the problem to the equipment.

It can be said that the protection of equipment is to ensure production. In this case, we must take all factors that affect the equipment status into the scope of assessment. OEE (qualified product rate * time efficiency * performance efficiency) solves this problem.

The assessment should be in place, and the relevant personnel should be taken into account. This includes the operators, equipment maintainers and quality assurance personnel of the equipment.

Therefore, when assessing the performance of equipment, we should make "four clear":

1) clear the examination area.

It is determined that the management authorization is the premise of the assessment with team, work unit or equipment as an assessment unit.

2) define the object of assessment.

The personnel involved in this area include: equipment operators, equipment maintenance personnel, quality assurance personnel, safety management personnel and so on. They should be unified into the examination area, and only a comprehensive assessment can turn everyone into a rope to avoid contradictions.

3) clear examination data.

In discrete manufacturing industry, OEE assessment is very applicable, but the premise is to ensure the accuracy and quantification of data acquisition and application, in line with information technology (IEM equipment management assessment system).

For process manufacturing industry (such as chemical industry), because the occurrence of equipment failure usually affects the whole production system, it is impossible to assess OEE value for a certain unit, and use equipment failure (accident) to measure, that is, comprehensive failure frequency and fault loss.

4) define the way of examination.

The level of equipment management is the embodiment of production capacity. If we use a simple fine, employees will naturally avoid disadvantages, cheat and hide the truth, which is very unfavorable to the improvement of equipment management ability.

In different regions, the level of equipment management is high and low. By ranking the performance, it can be linked to wages, and can be converted into a certain fund to the management unit. It can also encourage the excellent team to hang up the black team with the red flag.

We must not use such a stupid way to conduct performance appraisal, especially for Chinese employees, though they are not easy to resist, but to deal with them in a way of sabotage, the losses will be immeasurable, and the pain of enterprises will be endless.

Two, "fish" - the catalyst for improving equipment management capabilities.

The reward is definitely linked to contribution.

The improvement of equipment management capability depends on the improvement of equipment efficiency in each assessment area.

Equipment is a dead thing, and it can not be promoted without reason. It must be the result of people's improvement activities, so for reward, it must be achieved through project improvement activities.

The application of incentives in equipment management can be carried out in three ways:

1) refining and sharing single point courses.

From the perspective of knowledge classification, skills and methods belong to invisible knowledge, system and standard belong to explicit knowledge, invisible knowledge is used to solve problems, but explicit knowledge is conducive to disseminate.

Single point courses are organized to extract the invisible knowledge of employees, pform them into explicit knowledge and share them with other members in the organization. One is to spread good skills and methods (equipment operation, maintenance and maintenance skills and methods), and the two is to accumulate continuous knowledge wealth for the organization.

In order to motivate employees to refine single class, and give appropriate rewards according to the scope of dissemination and application effect.

For the organization, this is the win-win mode of spreading the fry and receiving the big fish.

2) rationalize proposals.

The enterprise is a team, there are many people, there are many ways. It is a good way to rationalize the idea of using the staff's thought for the enterprise.

The proposals generally come from the 6S source (pollution sources, cleaning difficulties sources, fault sources, waste sources, defect sources, accident risk sources). Employees think of ways to improve the source of equipment performance, and solve problems through rationalization proposals, so as to raise the level of equipment management.

Enterprises encourage employees to think about their business everywhere.

3) bottleneck project improvement.

There are bottlenecks in enterprises (failure prone, OEE low...

), bottleneck workflow (procurement, logistics, system process...

The efficiency of equipment can not be maximized.

By setting up projects and finding ways to solve these technical and management bottlenecks, enterprises can set some technological and managerial innovation appraisals, reward and reward teams and individuals.

Three. Stick - shaping the culture of execution.

There is a way of punishment. We think that employees will make mistakes, such as those who do not observe the standard of operation, 5S is not in place, and violate the rules expressly provided by enterprises, they must be punished.

But there must be a way of punishment. There must be a standard.

First, the development background of activity-based costing.

The rapid development of economy is inseparable from two important factors.

One is the application of advanced manufacturing technology, the other is the promotion and implementation of advanced management concepts.

The activity-based costing method discussed in this paper is another new field of cost control.

Many scholars have conducted theoretical research and empirical research on Activity Based Costing (staubus, 1971; 1987A; 1987b; Johnson, 1988; Kaplan, 1994).

Technological changes have made significant changes in the manufacturing environment of many companies. The use of a large number of machines and computer controlled equipment has improved the automation of the manufacturing process, thus reducing the labor of direct production.

Many early accounting systems are designed for the measurement and reporting of labor costs, and are no longer applicable to automated production requirements.

If we continue to follow the traditional accounting system, we will overestimate the cost of products with high yield and low complexity, estimate the cost of low output and high complexity products too low, and we can not know the gross profit of each product accurately, so it is difficult to stand in a competitive environment.

In addition, as the complexity of business increases, the diversification of products and services also increases, requiring more accurate quantitative resource consumption. Product mix, pricing and other decisions also require more accurate cost information.

In 1987, the research conducted by two professors of Rober Kaplan and Robin Cooper at Harvard Business School has attracted extensive attention from ABC.

Activity-based costing (ABC) has attracted wide attention in the fields of accurate cost information, improvement of business processes, resource decision making, and product pricing and portfolio decision making.

At present, many advanced companies in the world have implemented activity-based costing to improve the original accounting system and enhance the competitiveness of enterprises.

Two. Review of foreign research methods

1. The object of study.

The companies surveyed in the literature are divided into the following types: (1) advanced international manufacturing enterprises; second, customers of accounting firms; (3) customers of professional accounting software companies.

The choice of advanced manufacturing enterprises is due to the fact that enterprises in the industry are considered highly automated and have the advantage of using ABC. The growth of output value of their industries occupies a very important proportion in the growth of GNP, and also represents the advanced level of the economic development of a country.

The choice of the latter two is mainly from the channel of ABC, and the purchase of the ABC software by professional software companies, as well as the clients who request the accounting firms to provide activity-based costing services, not only needs the activity-based costing method, but also has further actions to implement.

They are the best window to understand the implementation of activity-based costing.

2. Feedback rate, object and method of investigation.

The high feedback rate shows that the analysis results are representative, but the statistical analysis of a country does not necessarily apply to other countries or other industries.

Most of the questionnaires were issued by the chief financial officer, the treasurer, or the standing Manager (factory manager, product manager, material manager, design engineer, manufacturing engineer, marketing manager).

These people are familiar with the daily operation and financial system of the company, and have certain educational background. They are more capable of knowing ABC than ordinary employees, and have the right to implement certain decisions.

The main methods of investigation include mail survey, face-to-face interview and telephone interview.

The current empirical research mainly adopts the field survey method (field study). For the limited research subjects, the postal survey method can provide in-depth analysis from the cross section of the subjects, and the cost of collecting data is low.

Face to face interviews or telephone interviews have a higher feedback rate and more detailed verbal communication, which is more conducive to finding out the crux of the problem.

3. Feedback types of survey

The feedback types of activity based costing are as follows:

According to the specific classification of the responders, on the one hand, we can investigate the situation of ABC as a new knowledge pmission. On the other hand, we can further investigate the application of ABC as a management technology. Before we have the knowledge of activity-based costing, we will analyze the implementation of the activity-based costing by comparing the cost structure, the current accounting system, the diversity of products and the competitive environment by implementing the ABC and the ABC.

Although activity-based costing (ABC) has long appeared in the academic field, the knowledge of ABC is becoming more and more popular, but its application is not extensive.

Armitage and Nicholson (1993) compared the enterprises in Canada and other countries, and found that the proportion of enterprises implementing the activity-based costing method was small: Canada was 14% (1992), Britain was 6% (1990), the United States was 11% in 1991, and significantly increased to 36% in 1993.

Similarly, Teoh and Schoch (1993) found that the utilization of activity-based costing was lower than that in Australia, 17% in Malaysia and 13% in Australia.

A recent survey of inners and Mitchell (1995a) shows that 20% of the surveyed British companies use Activity-Based Costing.

4. Method of analyzing data

There are several types of questionnaire design, one is question answering type, such as "what factors do you think determines your company's use of activity-based costing", and one is to list the possible answers directly, so that the respondents can choose, and may give each option the weight to evaluate its importance.

The content of the problem first involves the information of the respondents and the situation of the company being investigated, and the next is the understanding of the knowledge of ABC. Most of them do not directly ask the respondents whether you know the activity-based costing (ABC) method or not, but ask the respondents about some common sense knowledge of ABC, so as to test the extent of the activity-based costing.

As to which factors affect the implementation of activity-based costing, we mainly compare the implementation of activity-based costing (ABC) and the data of the enterprise's cost of operation (the number of companies and the number of production lines), make corresponding statistical analysis, test the significance of the difference to determine whether this factor is one of the obvious differences between the implementation and the non activity-based costing companies.

As to the satisfaction degree of the implementers to the activity-based costing, it is mainly through a set of scoring methods to compare and analyze the sample data before and after the satisfaction degree.

5. Main conclusions in the literature

(1) the reasons for the implementation of activity-based costing and non activity-based costing.

Among those who have knowledge of activity-based costing, the reasons for implementing ABC are as follows: (1) the existing cost information is inaccurate; second, facing a relatively fierce competition environment, such as automated production increasing with Japanese drama; 3. At present, there is a lack of decision-making information, such as non financial information.

The main reasons for not implementing the activity-based costing are: 1. The activity based costing is too complex and time-consuming; second, the current accounting system is still enough; third, the income cost of the activity based costing method is uncertain; (4) lack of experience; (5) the employees are unfamiliar with or unwilling to use the activity-based costing method; (3) the inconvenience in management decisions or processes; the high cost of implementation; the difficulty of choosing cost drivers; the lack of advanced computer technology at present to reduce the cost of developing the activity based costing and tracking activities; and lack of human resources and excessive training costs.

(2) the characteristics of companies using activity-based costing

The use of activity-based costing is related to some factors of the company, such as the cost structure of the company, the current accounting system, the diversity of costs and the competitive environment.

A, cost structure

The main reason for the activity-based costing method is that it can more accurately allocate manufacturing and distribution to products. By increasing the cost base, it is based on the operation rather than the cost of products, and uses a wider cost driver.

One of the important reasons for the introduction of activity-based costing is the change in cost structure in recent years (the increase in manufacturing costs, Cooper and Kaplan, 1988).

Based on this assumption, companies adopting activity-based costing have a very significant feature, that is, manufacturing cost relative value added cost (direct labor ten manufacturing cost) is very high.

B, the current accounting system

The value of introducing new accounting calculation methods depends on the current accounting system.

According to the literature on activity-based costing, the cost accounting and cost drivers of traditional accounting calculation methods are limited (see Cooper, 1988B).

The activity-based costing (ABC) increases the cost (operation) and cost drivers.

When considering the implementation of activity-based costing, management usually considers whether the activity-based costing method is an independent system or integrates the system with the current accounting system (Cooper, 19901991).

Yvonne p.shanaban (1997) considers that two factors should be taken into account when making the above decision, one is to change the effective way of the current accounting system, and the other is to develop the software cost that is integrated with the current system.

C, product diversity

The diversity of products is one of the reasons for the traditional accounting system to distort the cost information when calculating the product cost.

The diversity of products includes: the diversity of product output, the diversity of scale, the diversity of raw materials and the diversity of installation (Cooper, 1988a).

Companies that use Activity-Based Costing often have a higher degree of product diversity.

It is worth mentioning that companies that do not use Activity-Based Costing have more customized products than those using activity-based costing.

The reason is that although customized products usually mean the diversity of products, the diversity of materials and the diversity of installation, customized products usually increase the cost of developing new accounting systems, and the importance of accounting costs is usually determined by the degree of customization.

D, competitive environment

Cooper and Kaplan (1991, pp372) describe the use of activity-based costing. If the current accounting system is designed in the context of high cost, weak competition and low diversity of products, the implementation of ABC is feasible and beneficial when the cost of measurement is low, competition becomes fierce and the diversity of products increases.

As the economic environment is becoming more and more turbulent and competition is becoming more and more intense, compared with the activity-based costing method, traditional accounting has increased the cost caused by mistakes, so improving the current accounting system is very important.

E, the size of the company

There is much information that the size of a company is an important feature of the company that distinguishes ABC and ABC (ask and ax, 1992; Drury and tayles, 1994; Davies and sweeting, 1993; Innes and Mitchell, 1995).

Because big companies have stronger communication channels and better infrastructure and stronger demand for information, they are more interested in activity-based costing than small companies.

(3) expected revenue and problems in implementation of ABC

The possible benefits of implementing ABC are: providing more accurate product costs; providing corresponding cost information for pricing strategies; strengthening cost effective management and control; persisting in improving marketing strategies; improving profitability; ensuring the identifiable causes; effective analysis of product profitability; improving cost control; and providing accurate performance indicators.

At the same time, in the process of implementing the activity-based costing, there may be some problems: the identification of cost drivers; the accuracy of causality between cost and cost drivers; the cost of implementing ABC; the integration with the existing accounting system; the resistance encountered in the thought of promoting the activity based costing in the high level; and how to get support from lower level employees.

(4) the satisfaction of the company implementing ABC by ABC.

A number of companies around the world have begun to use ABC to improve their old accounting system. Whether the activity-based costing can bring the desired results.

In 1987, Howell et al studied the satisfaction degree of the company on product cost and performance measurement after the implementation of activity-based costing (ABC) in the research project hosted by IMA and CAM-I. The results are as follows:

(1) all the respondents reported that the implementation of ABC has improved at least one area of the accounting management system, and has also reported an important breakthrough in the performance measurement system.

2. After the implementation of activity-based costing, the satisfaction degree of the company's product cost and activity-based costing are obviously positively related to the degree of use in product pricing and portfolio strategy.

The satisfaction of ABC in cost reduction is also proportional to the level of information used by the executive manager in ABC.

This shows that managers who are more satisfied with ABC are more likely to take practical actions and effectively use Activity-Based Costing to influence decisions.

3. Before the use of the activity-based costing, the interviewees had little confidence in the accuracy of the traditional accounting information. The traditional accounting system was designed for departments and external reports, and their customers were narrower in service.

The implementation of activity-based costing can improve the accuracy of cost information. The information provided by activity-based costing will support product resource decision, product pricing and portfolio strategy, which also support customer profitability analysis.

Three. Research on the application of ABC in Hongkong.

We studied the application of Activity-Based Costing in Hongkong area in 1999. We surveyed 810 companies (including listed companies and non-listed company in cima-the Hongkong branch of the chartded Institute ofmangement accountants) by letter questionnaire and wrote to each company's chief financial officer or financial manager.

A total of 90 valid questionnaires were returned, with a feedback rate of 11%, including 47 listed companies and 43 non-listed company (see Table 2).

Of the 90 companies, 10 have used the activity-based costing (4 listed companies and 6 non-listed company), and another 4 (2 listed companies and 2 non-listed company) are about to implement.

The design of the questionnaire covers the details of using ABC, the experience of using ABC and the basic situation of the company.

From the feedback letter, it is found that the average annual use of the activity cost method in the company is four years. Obviously, a large number of companies have not been able to contact the activity-based costing law for a long time.

37 of the 76 companies that do not use or do not plan to use ABC temporarily know the knowledge of activity-based costing, and 39 know little about it.

1, the use of activity-based costing industry situation and scale structure

The impact of industry factors on the implementation of activity-based costing (due to the limited number of surveys, exclude individual industries (usage = total).

The utility rate of public utilities is higher than that of other industries, which is not consistent with the assumption that industrial manufacturing enterprises use the higher degree of activity-based costing (industrial enterprises are usually considered to be highly automated and have the advantage of ABC).

2. Comparison between users and non users of activity-based costing

Compared to the scale of users and non users, the three scales of measurement (staff, sales volume and total assets) show that the scale of using activity-based costing is larger than that of companies without activity-based costing.

This point is consistent with ask and ax (1992), bjornenak (1997), bright et al (1992), Chung Er Al (1997), Drury Drury 1994 (1994), and (1995).

Larger companies have greater demand for information (based on the complexity of large companies themselves), which itself is the center of information and has more resources to implement activity-based costing.

Bjornenak (1997) thinks that the dissemination of activity-based costing (ABC) is based on a hierarchical directory diffusion method, first applied to large companies and then extended to small companies.

(2) diversity of products

Bjornenak (1997) believes that companies using ABC may have more product lines.

The cost allocation of large and varied products is less than that of only a few or a variety of products.

Bjornenak (1997) summarizes two criteria for measuring product diversity, that is, the degree of customization and the number of products.

We adopt a similar classification method.

The questionnaire inquired about the number of product lines owned by the respondents.

As shown in Table 3, companies using ABC have more production lines (551 versus 297) than those without ABC, and the standard deviation is higher. However, the statistical difference is not significant.

We also asked respondents for their percentage of customized products (for specific customer specifications).

The proportion of companies that use ABC in Table 3 is also higher (59%>45.36%), but the gap between them is not large.

The result of Table 3 shows that the directional support of product diversity and the positive relationship between using ABC is not statistically significant.

Bjornenak (1997) thinks that there is a positive relationship between customization and the use of ABC, but the negative relationship is found in the empirical study.

He explains this phenomenon because higher customized products are too complex and expensive for companies to use, rather than using traditional accounting methods.

(3) the pressure of competition

Cooper and Kaplan (1991) think that when the company's internal competition is relatively high, the activity-based costing will play an important advantage.

Highly competitive products, because of less profit, need more accurate cost information to determine the real profit situation.

We use the following two criteria to measure the competition according to bjornenak (1997).

(1) ask the respondents the number of their competition partners.

(2) the number of exports in sales (because the export market is more competitive than the domestic market).

As can be seen from table 3, although there are more competitors in the enterprises using ABC than those who do not use the activity-based costing method (averaging 213 to 170), the difference between them is not significant.

For export volume, there is a similar situation.

Bjornenak (1997) also found that the difference in competitive pressures between the ABC and the ABC companies was not statistically significant. On the contrary, Chung et al (1997) found that fierce competition would help enterprises to use ABC.

(4) cost structure

An important difference between activity-based costing and traditional costing is the allocation of overhead costs.

If the manufacturing cost of the enterprise is very high, the activity-based costing method will be more effective.

Bjornenak (1997) found that there was a positive relationship between high manufacturing costs and activity-based costing.

However, the results of our research are the opposite. Table 3 shows the difference in the cost structure between the activity based costing method and the non activity-based activity-based costing method.

Therefore, in Hongkong, the higher proportion of manufacturing cost in the cost structure is not the salient feature of the company using ABC.

3, the motive of implementing activity-based costing.

The questionnaire inquired about the motivation and implementation experience of implementing activity-based costing.

There are only 14 enterprises implementing the activity-based costing method and the planned activity based costing method, and only 10 have experienced the activity-based costing.

Due to the small sample size, the motivation and experience of the implementation of ABC are limited, and the formal statistical hypothesis test is not feasible.

The questionnaire investigates the motivation of implementing the activity-based costing, and divides its importance into 10 levels: the "1" representative is not important, and the "10" representative is very important.

As shown in Table 4, we use the activity-based costing method to get "more accurate cost information", which has the highest score, indicating that it plays a very important role in the use of activity-based costing.

"Improving the business process" is also an important factor.

The activity-based costing can trace costs back to all operations, and effectively identify defects in the process of operation, so as to make non effective processes effective.

Some companies use Activity-Based Costing to make product pricing and product mix. The importance of the incentive factor is 6.92.

Activity-based costing can also be used for resource decision making, the importance of which is 5.11.

4, implementation of activity-based costing support

We also surveyed the departments from which the activity-based costing method was supported and divided the response results into 10 grades.

"1" means the importance of low, and "10" means the importance of high.

As shown in Table 5, although activity-based costing is a cost calculation method, accounting and finance departments are not important sources of support for ABC implementation.

Some accountants may think that activity-based costing is a threat to the work they have already established.

More noteworthy is that accounting and finance departments use less activity-based costing data than other departments.

The conclusion of the result and table 4 is that the main motivation of activity-based costing is to improve product cost information.

5. Design and implement the difficulties in ABC.

Activity-based costing (ABC) is a time-consuming and complex system (Armitage and nicholsom 1993; Chung et al 1997). In view of this, we evaluated each stage of the implementation of ABC.

Marking each stage as 10 grades: "1" is not difficult, and "10" means very difficult.

Table 6 shows the results of the study.

The most difficult thing to implement activity based costing is to collect data for the system.

It is also a difficult task to adjust the implementation details of activity-based costing for new operations, products and organizations.

The incorporation of Activity-Based Costing into the existing accounting system is also a challenging task and new skilled technicians are needed.

According to the survey, the identification of the activity-based costing and the determination of cost drivers are considered to be the simplest of the elements of the activity-based costing, which is the opposite of the conclusion of Armitage and Nicholson (1993).

6. The degree of satisfaction with the activity-based costing

The users of the activity-based costing are investigated for the satisfaction of the new system.

As shown in Table 7, before the use of ABC, the description of 6 characteristics (performance, cost reduction, process improvement, cost information, pricing strategy and resource decision) reflects the company's low satisfaction with traditional cost accounting methods.

After the use of activity-based costing, other aspects of resource pricing have been significantly improved, almost 100%.

Although the number of feedbacks is not large, the magnitude of satisfaction is indeed noticeable.

Swenson (1995) also found an important improvement in the cost system of American manufacturing enterprises.

7. Reasons for not using activity-based costing

For enterprises that do not implement activity-based costing, we have investigated the reasons why they are not implemented (1= factor is not important, 10= factor is very important), as shown in Table 8.

"Lack of sufficient training staff" is an important factor in not implementing the activity-based costing.

It is also important for the satisfaction of the existing accounting system and the lack of support from the upper level, which is consistent with the conclusion of Chung et al.

The respondents may also reflect that installation and implementation may take a lot of time.

Four. Conclusion

The activity based costing has attracted extensive attention in the past 10 years. The new consulting firm has expanded the application scope of the activity-based costing and developed corresponding software to push the service to the market and sell it to the existing and potential customers.

The activity-based costing has also become a must in the university accounting course.

The purpose of this paper is to investigate the practical application of Activity-Based Costing in Hongkong.

Up to 1999, the use of activity-based costing (ABC) has not been very extensive. 11% of the companies surveyed have used ABC, and 5% of them intend to use it.

One of the problems is the definition of accounting method. The accounting system used by some companies is very similar to the activity-based costing. However, they do not call activity-based costing. But the companies that call themselves activity-based costing may use traditional cost pools and cost drivers. Therefore, in the design of the questionnaire, detailed questions about the activity-based costing are asked in detail to prevent misunderstanding due to definition.

　　對香港應用作業成本法情況的研究表明，大量公司接觸作業成本法的時間還不長;公用事業的使用率比其它行業都高，這點和“工業企業使用作業成本法程度較高”的假設并不相符;使用作業成本法的公司在規模上(員工、銷售量、總資產)都顯著大于沒有使用作業成本法的公司;而產品的多樣性以及競爭壓力和作業成本法使用上的正向關系在統計上并不顯著;制造費用比例較高在香港并不是使用作業成本法公司的顯著特征，在統計上使用作業成本法的公司和沒用使用作業成本法的公司，其成本結構也沒有顯著的區別;獲得更為準確的成本信息成為實施作業成本法的主要動因，改善經營過程同樣也是一個重要的因素;但奇怪的是，會計和財務部門并不是支持作業成本法實施的主要部門和主要使用者;實施作業成本法最困難的是為系統收集信息;令人欣慰的是，使用作業成本

After the law, performance improvement, cost reduction, process improvement and other aspects have been significantly improved besides resource pricing, and the lack of adequate training staff is a major reason for not implementing the activity-based costing.

Due to the limited number of samples, empirical research is somewhat limited, so we are just an exploratory research. In bjornenak's words, Hongkong is a distributing center of information, and its research potential is still very large in terms of ABC.