ABC Model of Cost Accounting Case Study: Xu Ji Electric Co.
An example of a company using ABC model for running business One useful accounting method for assigning all a company’s direct as well as indirect costs to proper categories is known as activity based costing. While this term sounds complex, there’s many activity based costing example and explanation available to illustrate control of company’s costs. Let’s have look at the implementation of activity-based costing (ABC) at Xu Ji Electric Co. Ltd (Xu Ji), a large Chinese manufacturing company.
Xu Ji is a state-owned enterprise (SOE), turned public limited company (PLC). The company piloted ABC implementation in one of its main production divisions in December 2001, when ABC concepts were at a theoretical level in China (Liu and Pan, 2007). Two more attempts to extend the use of ABC in one of its subsidiaries and sales functions took place in 2005 and 2008.
Furthermore, Major events took place during the latter research endeavor, including two major acquisitions – first by a pension fund and later by the national grid and recent decision to implement an enterprise resource planning (ERP) system. These events provided a unique opportunity to unveil factors pertinent to organizational decisions towards information system implementation, to extract ‘real-life’ interactions between personnel at various organizational hierarchies; and to evaluate complex relationships between changes, organizational and individual learning.
Chinese management styles rely more on managing people and relationships – Chinese management ethos – than on technological systems and management tools. The level of office and accounting computerization and IT-enabled business solutions is not as advanced as those in the west. Xu Ji started from a very basic level, building financial accounting systems and office computerization before implementing the ABC system, which captured direct costs and variable manufacturing overheads before processing.
The main achievements of Xu Ji’s ten years ABC
Xu Ji is a state-owned enterprise (SOE), turned public limited company (PLC). The company piloted ABC implementation in one of its main production divisions in December 2001, when ABC concepts were at a theoretical level in China (Liu and Pan, 2007). Two more attempts to extend the use of ABC in one of its subsidiaries and sales functions took place in 2005 and 2008.
Furthermore, Major events took place during the latter research endeavor, including two major acquisitions – first by a pension fund and later by the national grid and recent decision to implement an enterprise resource planning (ERP) system. These events provided a unique opportunity to unveil factors pertinent to organizational decisions towards information system implementation, to extract ‘real-life’ interactions between personnel at various organizational hierarchies; and to evaluate complex relationships between changes, organizational and individual learning.
Chinese management styles rely more on managing people and relationships – Chinese management ethos – than on technological systems and management tools. The level of office and accounting computerization and IT-enabled business solutions is not as advanced as those in the west. Xu Ji started from a very basic level, building financial accounting systems and office computerization before implementing the ABC system, which captured direct costs and variable manufacturing overheads before processing.
The main achievements of Xu Ji’s ten years ABC