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Apply Activity-Based Costing to Calculate Product Cost in Small and Medium Enterprises

Received: 29 May 2013     Published: 10 June 2013
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Abstract

Traditional costing (TDC) has been used many decades and very popular with organizations because it is simple and inexpensive. In today’s business environment, overhead cost has a significant proportion in total cost, using TDC for assigning overhead cost lead to inaccuracy of product cost. Activity-Based Costing (ABC), until now, is considered as a modern costing method that overcomes the limitations of TDC and it has been popular in developed countries. However, it is until new method in developing countries, so it needs to be more diffused in this countries.This paper conducted the project on ABC method in Van Chinh enterprise in Vietnam. We defined ten activities centers as shown in table 4. Then, we applied ABC method to calculate cost of products and compared with the results calculated by TDC method. This paper concluded that ABC method is practical and appropriate for such a Van Chinh enterprise and provides more accurate information for cost management and management decision-making.

Published in International Journal of Business and Economics Research (Volume 2, Issue 3)
DOI 10.11648/j.ijber.20130203.13
Page(s) 59-68
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2013. Published by Science Publishing Group

Keywords

Activity-Based Costing (ABC), Traditional Costing (TDC), Vietnam, Van Chinh Enterprise, Cost Analysis, Small and Medium Enterprises

References
[1] Chen, G.M., Firth, M. and Park, K., 1993. The implementation and benefits of activity-based costing: a Hong Kong study. Asian Review of Accounting, 9(2), 23-37.
[2] Chongruksut,. W. and Brooks, A., 1993. The adoption and implementation of Activity-Based Costing in Thailand. Asian Review of Accounting, 13(2), 1-17.
[3] Cohen, S., Venieris, G. and Kaimenaki, E., 2005. ABC: adopters, supporters, deniers and unawares. Managerial Auditing Journal, 20(9), 981-1000.
[4] Hansen, D.R. and Mowen, M.M., 2003. Cost Management: Accounting and Control. Peking: Peking University Press.
[5] Horngren, Charles T., Sundem Gary L., Stratton William O. Introduction to management accounting. Peking University Press, 2007.
[6] Kaplan, R.S. and Atkinson, A.A., 1998. Advanced Management Accounting. Prentice Hall International, Inc.
[7] Kaplan, R.S. and Anderson, S., 2004. Time-Driven Activity-Based costing. Harvard Business Review, 2004, November, 1-9.
[8] Kevin Baird, 2007. Adoption of activity management practices in public sector organizations, Accounting and Finance, 47, 551-569.
[9] Khozein, A. and Dankoob, M., 2011. Activity Based Costing System and its succeed implementing in organizations. Australian Journal of Basic and Applied Sciences, 2011, 5(10), 613-619.
[10] Krumwiede, K.R., 1998. ABC: Why it's tried and how it succeeds. Management Accounting, April: 32-38.
[11] Liu, L.Y.J. and Pan, F., 2007. The implementation of Activity-Based Costing in China: An innovation action research approach. The British Accounting Review, 39, 249-264.
[12] Nassar, M., Al-Khadash, H.A. and Sangster, A., 2011. The diffusion of activity-based costing in Jordanian industrial companies. Qualitative Research in Accounting & Management, 8(2), 180-200.
[13] Zhang, Y.F. and Isa, C.R., 2010. Behavioral and organizational variables affecting the success of ABC success in China. African Journal of Business Management, 4(11), 2302-2308.
[14] Tandung Huynh, Gong Guang Ming, Tran Phuoc, 2013. So sánh phương pháp ABC và phương pháp tính giá truyền thống – sự cần thiết áp dụng phương pháp ABC cho các doang nghiệp Việt Nam. Tạp chí Đại Học Công Nghiệp thành phố Hồ Chí Minh, 10(1), 58-70. (Tandung Huynh, Gong Guang Ming, Tran Phuoc, 2013. A comparative analysis of Activity-Based Costing and traditional costing, the necessary to apply ABC in Vietnamese companies. Journal of Ho Chi Minh City University of Industry, 10(1), 58-70).
[15] Trương Bá Thanh, Đinh Thị Thanh Hường, 2009. Vận dụng phương pháp tính giá dựa trên cơ sở hoạt động trong các doanh nghiệp in. Tạp chí khoa học và công nghệ, đại học Đà Nẵng, 3(32), 1-10. (Truong, B.T. and Dinh, T.H., 2009. Apply ABC method in the printing enterprise. Journal of Da Nang Science and Technology, 3(32), 1-10).
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  • APA Style

    Tandung Huynh, Guangming Gong, Ngocminh Ngo. (2013). Apply Activity-Based Costing to Calculate Product Cost in Small and Medium Enterprises. International Journal of Business and Economics Research, 2(3), 59-68. https://doi.org/10.11648/j.ijber.20130203.13

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    ACS Style

    Tandung Huynh; Guangming Gong; Ngocminh Ngo. Apply Activity-Based Costing to Calculate Product Cost in Small and Medium Enterprises. Int. J. Bus. Econ. Res. 2013, 2(3), 59-68. doi: 10.11648/j.ijber.20130203.13

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    AMA Style

    Tandung Huynh, Guangming Gong, Ngocminh Ngo. Apply Activity-Based Costing to Calculate Product Cost in Small and Medium Enterprises. Int J Bus Econ Res. 2013;2(3):59-68. doi: 10.11648/j.ijber.20130203.13

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  • @article{10.11648/j.ijber.20130203.13,
      author = {Tandung Huynh and Guangming Gong and Ngocminh Ngo},
      title = {Apply Activity-Based Costing to Calculate Product Cost in Small and Medium Enterprises},
      journal = {International Journal of Business and Economics Research},
      volume = {2},
      number = {3},
      pages = {59-68},
      doi = {10.11648/j.ijber.20130203.13},
      url = {https://doi.org/10.11648/j.ijber.20130203.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20130203.13},
      abstract = {Traditional costing (TDC) has been used many decades and very popular with organizations because it is simple and inexpensive. In today’s business environment, overhead cost has a significant proportion in total cost, using TDC for assigning overhead cost lead to inaccuracy of product cost. Activity-Based Costing (ABC), until now, is considered as a modern costing method that overcomes the limitations of TDC and it has been popular in developed countries. However, it is until new method in developing countries, so it needs to be more diffused in this countries.This paper conducted the project on ABC method in Van Chinh enterprise in Vietnam. We defined ten activities centers as shown in table 4. Then, we applied ABC method to calculate cost of products and compared with the results calculated by TDC method. This paper concluded that ABC method is practical and appropriate for such a Van Chinh enterprise and provides more accurate information for cost management and management decision-making.},
     year = {2013}
    }
    

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  • TY  - JOUR
    T1  - Apply Activity-Based Costing to Calculate Product Cost in Small and Medium Enterprises
    AU  - Tandung Huynh
    AU  - Guangming Gong
    AU  - Ngocminh Ngo
    Y1  - 2013/06/10
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    N1  - https://doi.org/10.11648/j.ijber.20130203.13
    DO  - 10.11648/j.ijber.20130203.13
    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
    SP  - 59
    EP  - 68
    PB  - Science Publishing Group
    SN  - 2328-756X
    UR  - https://doi.org/10.11648/j.ijber.20130203.13
    AB  - Traditional costing (TDC) has been used many decades and very popular with organizations because it is simple and inexpensive. In today’s business environment, overhead cost has a significant proportion in total cost, using TDC for assigning overhead cost lead to inaccuracy of product cost. Activity-Based Costing (ABC), until now, is considered as a modern costing method that overcomes the limitations of TDC and it has been popular in developed countries. However, it is until new method in developing countries, so it needs to be more diffused in this countries.This paper conducted the project on ABC method in Van Chinh enterprise in Vietnam. We defined ten activities centers as shown in table 4. Then, we applied ABC method to calculate cost of products and compared with the results calculated by TDC method. This paper concluded that ABC method is practical and appropriate for such a Van Chinh enterprise and provides more accurate information for cost management and management decision-making.
    VL  - 2
    IS  - 3
    ER  - 

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Author Information
  • Business School, Hunan University, China, Faculty of Accounting and Auditing in Industrial University of Hochiminh City, Vietnam

  • Business School, Hunan University, China

  • Business and Trade School, Hunan University, China, Faculty of Business Administration in Industrial University of Hochiminh City, Vietnam

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