Disadvantages Of Traditional Cost Management Methods In Chinese Enterprises

Cost is a comprehensive embodiment of the efficiency of an enterprise's production and operation. It is a contrast relationship between the input and output of an enterprise. Low cost means less resources to provide more products and services, which means high efficiency, but not necessarily high efficiency.

Many enterprises in China divide and calculate the cost of products according to their cost habits.

The fixed cost of unit product sharing can be reduced, so the higher the output, the lower the cost of unit product, and the higher the profit will be when the sales volume is unchanged.

This approach causes enterprises to reduce the cost of products unilaterally by increasing production, regardless of market demand for products, and to shift or hide the cost of production process through inventory backlog to improve short-term profits.

The reason for this phenomenon lies in the lack of market ideas in the cost management of enterprises.

Misunderstandings seem to occur in management decisions. It seems that the bigger the output, the lower the cost, the higher the profit.

Many enterprises only pay attention to the cost management in the production process, ignore the cost management of the supply process and sales process, pay attention to the cost management after the production, ignore the product design before the production and the cost management of reasonable organization of production factors.

Some enterprises have weak cost management in advance, lack of standardization and system in cost prediction and cost decision making, and lack of scientificity, seriousness and increase or decrease in cost plan, which leads to blindness in cost management after and after the event.

In the specific cost accounting, we only pay attention to financial cost accounting, lack of management cost accounting, pay attention to production cost accounting, and ignore the cost of product design process and sales cost accounting.

As for the means of cost management, it is still in the stage of manual operation, and lacks modern management means.

One of the basic requirements of modern cost management is the timeliness, comprehensiveness and accuracy of cost information, and manual operation is difficult to achieve these requirements.

Traditional cost management system fails to adopt flexible and diversified cost methods, which makes cost management fall into a simple cycle of reducing costs and reducing costs. It can not provide the correct information needed for decision-making, can not reflect the business process in depth, can not provide the information of each operation link, and the antecedents and consequences of cost in various links. Sometimes even even people who make cost statements can hardly explain the embarrassing situation of their own "product" cost, thus misleading the formulation of business strategy.

In addition, the traditional object of cost management is limited to the information of the financial aspects of the products, and can not provide the non-financial information such as resources, operations, products, raw materials, customers, sales market and sales channels needed by the managers, so it is difficult to provide sufficient information for strategic management.

Conventional

Based on the assumption that business volume is the only factor affecting cost, the cost accounting process is too simple.

In the past highly labour intensive enterprises, the simple assumption of accounting (i.e. the allocation of indirect costs based on direct labor hours or output) usually does not seriously distort product costs.

However, under the modern manufacturing environment, the proportion of direct labor cost has been greatly reduced, and the proportion of manufacturing costs has increased significantly. The traditional cost calculation method will produce unreasonable phenomena. 1, the proportion of direct labor cost in the cost of products will be smaller and the proportion of manufacturing costs will be increased. 2, more and more operating costs will not be allocated with working hours. 3.

The use of traditional costing will lead to serious distortion of product cost information and make enterprises mistakenly choose the direction of product management.