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For the company which has successfully implemented ABC-system, the urgent problem is how to use the foundation information of ABC-system to control the cost formed in the process of production effectively, establish an overall cost management system which included cost calculation and cost control, then to improve the benefit of enterprises. This paper established activity-based cost control model, formulated the activity-based cost standard model, put forward the selection principle and method of activity-based cost control index, then constructed the analysis of cost variance model and early warning system model .Finally, the paper taked HZ pharmaceutical company as a case study which had implemented ABC-system for 3 years. This blueprint design will lay the root for the realization of the following Activity-based cost control system. Keywordsactivity-based cost; control model; standard; index I. RESEARCH BACKGROUND AND SIGNIFICANCE At present, with the global economic crisis poised to get much worse, more and more enterprises pay their attention to the inner management by the way of strengthening the cost control. Activity-Based Costing Management(ABCM) is the international advanced cost control method. As few company in our country succeed in the implementation of ABC, the research or case based on ABCM application is rarer. The paper based on the ABC-system which has been implemented for 3 years by HZ pharmaceutical company, uses the ABC data which has been set up and gradually become perfect to conduct the activity-based cost control research, for the purpose of achieving cost control effectively, reducing product cost and improving the economic efficiency. ABCM uses the thoughts of activity-based management to implement responsibility to every activity center and finally takes shape of a full corporate responsibility cost control system on the basis of activity center. The non value information coming from activity center about cost driver data, will not only provides the financial index, but also non financial index for the ABCM-system; It can track the source of the waste of resources not only from the way of value creation, but also the perspective of the fundamental reason of the cost formation, therefore, enterprises can expand the cost control points, take cost control into practice and finally enhance the control efficiency. The thought of activity-based cost control is a kind of new cost management method, for a long time, many scholars devote themselves to its theoretical research and practical application. On the basis of wide research on theories and literatures at home and abroad, ABC has not only improved the accuracy of cost calculation, but also played an important role in cost control, performance evaluation and profitability analysis. In 1992, professor Johnson and professor Kaplan chose eight big company as a pilot, and then "Implementing Activity-Based cost management, Moving from Analysis to Action" was completed, This work expounded the superiority of ABC in the cost management through empirical analysis; Since 1990s, continuous research about its theory and application, effectiveness and difficulties, application prospect had been conducting positively and comprehensively in Chinese scholars(Xuying Yu, 1991, 1995; Peng Xia, 1993; Guangyuan Wang,1995; Hang Sun, 1995; Peiyu Ou,Pingxin Wang, 2002; etc). In contrast, the application status of ABC in practice appeared relatively lag and discreetly, it is only applied tentatively in a few enterprises, ABCM application is rarer. why? The mainest reason is that enterprises have to pay high cost for ABC/ M’s application. II. ABCM THEORY RESEARCH A. Establishing the ABCM Model ABCM-system is based on the financial information of ABC-system, at the same time, it also needs some information from other systems, such as daily production system. It conducts the cost management activities through extracting and processing cost control information by the principle of controllability, integrity, materiality. The main architecture of ABCM-system can be divided into five modules:  Cost control index. Designers should define the data dictionary model first, and then a large amount of basic data, such as value, driver quantity, that can be extracted from Data Warehouse to form cost control index.  Cost control standard. According to actual production technology and management level, standard can be divided into the optimalizing standard and normal standard, etc. ABC-system is their historical basis.  Actual cost calculation. According to the cost calculation by ABC-system, it will get the actual cost of activity center. This paper is the follow-up research achievement of the project “ study of Timely Activity-Based Costing” (70172010) supported by the National Natural Science Foundation of China. It’s also supported by Zhejiang Provincial “Accounting Engineering Experimental Teaching Demonstration Center” [Zhejiang Educational Office of Higher Education (2010) No.183] and the project “Study of Activity-Based Costing System Optimization” (Y201224759) of Zhejiang Provincial Scientific Research program of the Education Department of China. Proceedings of 2012 International Conference on Mechanical Engineering and Material Science (MEMS 2012) © 2012. The authors Published by Atlantis Press 738  Cost variance calculation and preliminary assessment. Due to various factors, usually there is some differences between actual activity cost and standard activity cost, including price variances, quantity variances and efficiency variances,etc.  Cost warning. According to the results of the cost variance calculation, if the unfavorable variance amplitude reaches to δ or above, ABCM-system will give prompt warning. The model of ABCM can be showed in the following Figure1: Figure 1. The Framework of ABCM Model(One Dimensional) Note: 1When ”R-Rs” <δ,it’s normal fluctuation range; When ”R-Rs” >δ, prompt warning will be given; Usually δ is assigned 0.05. 2 *1 According to cost target, such as product, management levels ,it could be conducted respectively; *2 Cost is recessive for workshop and working team, it needs relationship conversion model “Cost/Activity” to convert cost index into non-financial index which is more easy for field control; *3 It’s the same with *2; *4 “Activity” is included non value data. B. The Selection of ABCM Index 1) The Advantage of ABCM Index Traditional cost control is lack of analysis for the process cost, due to the interference of objective economic environment and the influence of the traditional accounting method, its reliability is lost. Activity-based costing makes possible multilevel and omnibearing cost control index by using multiple cost drivers to assign overhead cost with the result of presenting the process formation of cost more clearly and accurately. 2) The Principle of ABCM Index a) Controllability.In order to reflect the reasonable responsibility belong to related responsibility center, the controllable cost should be separated from the noncontrollable cost before formulating the cost control index. b) Integrity.Comprehensive evaluation and examination for responsibility center only can be realized by establishing multidimensional and crossed index. c) Materiality. The establishment of index must be able to seize the main body, reflect the key, let the managers to master the important resources consumption situation in time. 3) The Classification of ABCM Index Activity-based cost control index can be divided into financial and non-financial index. Financial index mainly refers to cost value index, it could clearly show the value and directly reflect the condition of multilevel resources expenses. Non-financial index mainly involves quantity, efficiency and quality. The three aspects are all the reference factors for ABCM. Such as cost driver quantity, resource consumption quantity, etc. According to the actual situation, different activity center may apply different index, therefore, each department shall choose the best effective index for the construction of comprehensive index system. C. The Setting of ABCM Standard 1) The Advantage of ABCM Standard ABCM standard differs from traditional cost control standard. In traditional management environment, the core and starting point of cost control standard is product,and the standard would be continued in a long time without any revise with the result that enterprises often failed in cost control. ABCM standard whose core is activity provides possibillity for enterprises to implement cost control to each activity or activity center which effect the cost of products, therefore, it is set by activity or responsibility center. Considering the changes of enterprise's status and the external environment, this kind of ABCM standard is not static, dynamic standard will reflect the new conditions and goals through a constant changing. 2) The Principle of ABCM Standard a) Integrity.To apply it in the setting of ABCM standard, enterprises can balance interest and responsibility between different activity centers belong to the same activity chain. b) Materiality. The setting of ABCM standard should seize the key point, not every item need standard. In addition, important influencing factors should be considered before the standard is set. 3) The Foundation of ABCM Standard In the concept of activity management, activity is the basis of cost, the key of cost management, so the main body of activity-based standard system should be activity. The basis of standard can be divided into four part: The optimal value(Sh), Mobile weighted mean value(Sa), Expected value(Se),Adjusted value(Sr).Usually Sh are created when business management level and equipment production status are in optimal conditions, it is difficult to realize; Sa represents the most close production status and technological conditions, it’s close to reality and can be achieved with a little effort; Se embodies manager’s r

The Research of ABCM Model —Example of HZ Pharmaceutical Company