INTRODUCTION TO THE RESEARCH OF THE THESIS
1.1. Introduction to the study and research purposes
The thesis is built to meet the following objectives:
- Systemize a theoretical basis for management accounting in general and cost
management accounting in particular in enterprises.
- Study and investigate the current status of cost management accounting in
Vietnam plastic corporation, in which the study focuses on companies listed on the
Vietnam stock exchange due to their more advanced management than peers and
the availability of accurate and transparent information.
- Analyse and assess the status of cost management accounting in Vietnam plastic
corporations in relation to the information needs of the corporate governance.
- Propose solutions and conditions to complete cost management accounting in
Vietnam plastic companies to match the operational characteristics of these
companies and meet the information needs of the managers in the current
1.2. Research overview
A number of scholars have conducted surveys and research on cost management
accounting techniques which are applicable in countries around the world and
focus on the manufacturing enterprises for the fact that they are where the concept
of management accounting, cost accounting and cost management accounting
1.2.1. In developed countries
In the UK, research by Drury et al in 1993  about the manufacturing firms in
general shows that the methods of determining cost as the method based on labor
is often used by the manufacturing enterprise, while the method based on activities
costs (ABC) is appreciated but not widely applied. The cost norms construction
techniques, payback analysis, profit targets are also applied widely.
In the US, a survey by audit firm Ernst & Young in 2003 on 2,000 CFO, vice
president in charge of finance, cost control manager shows that the majority of
managers in the US are still favour the application of traditional tools. The
application of modern methods is still uncommon and in the testing phase.
In Australia and Japan, 1999, Wijeywardena and Zoysa  conduct a study on
217 Japanese firms and 231 Australia firms. Research shows that Australian
manufacturing enterprises focus on cost control tools such as estimation, cost
norms construction and variation analysis in production, while companies in Japan
focus on planning tools and cutting costs, such as cost objectives construction in
the planning and designing phase of products. ABC method is applied in Australia
more than in Japan.
In New Zealand, Adler, Everett and Waldron in 2000  survey and interview
the management accounting experts in enterprises. The results show that
traditional methods are widely used and more popular than modern techniques of
management accounting. In addition, the companies, whose headquarters are in
Australia, apply ABC and the other techniques of cost control better than local
1.2.2. In developing countries
In Arab countries, the study of McLellan and Moustafa 2010  in the
manufacturing enterprises in Arab countries shows that the cost management
accounting techniques most applied are planning tools and traditional control as
estimation, traditional methods of determining the cost as based on labor or based
on norms together with the variation analysis. The modern method of cost
management accounting as ABC and cost targets are not used by many firms.
In China, in 2007, Xiao et al [105, p.32-37] conducts research on the status of the
application of management accounting techniques. The results indicate that
overall, the use and awareness of the techniques of cost management accounting
are increasing in China, large companies and manufacturing companies tend to
apply the cost management accounting methods more than others.
In India, the study by Anderson and Lanen [59, p.379-412] 1999 show that Indian
firms focus on benchmarking techniques and costs related data collection. The
study also shows an improvement in the planning and estimation in India firms.
In Malaysia, Isa and Thye  2006 study the actual use of the standards of
management accounting in manufacturing enterprises. The results show no support
for the judgement that companies with complex manufacturing process typically
use modern techniques of management accounting. The use of the modern tools of
cost management accounting in manufacturing enterprises are not necessarily
correlated with the increasing level of competition in the market, and when the
perception of the competitiveness increases, enterprises tend to use many
traditional tools of management accounting and not the modern tools.
It can be seen that, in general, accounting management have been studied by many
scholars under many different angles, from the overall study of management
accounting to the specific research in each issues in management accounting.
However, these works only study management accounting in accordance with
traditional methods and not the modern methods. Besides, most of the studies
(except for the work of Mr. Pham Ngoc Toan) use very limited survey data from
enterprises, so the research judgment is largely subjective to the authors .
Recently, the application of management accounting in specific sectors has been
studied by a number of authors. Results of these studies show that, for different
industries, firms using different accounting management methods to serve the
specific purpose of management of the business.
In Singapore, Ghosh et al  1997 conducts a study and classifies the level of use
of management accounting techniques in 109 manufacturing enterprises. The
results show that the estimation tool is most popular applied, followed by longterm planning, cash estimating, periodically income reporting, building cost
norms, determining costs according to operation, managing comprehensive
quality, breakeven analysis, construction budgeting ...
In the Philippines, the study of Manolo in 2001 [92, p.429-465] at 500 companies
in the postal sector shows that only 16% of them use the method of determining
costs according to operation, 55% still applies traditional methods and 142
companies did not respond about what methods are applied.
1.2.3. In Vietnam
The study of management accounting in Vietnam can be briefed through the
following diagram (Figure 1.2):
to Vietnam, a brief
study of management
- Nguyen Viet (1995)
- Pham Van Duoc
Study specific issues in
- Pham Quang (2002)
- Tran Van Dung (2002)
- Le Duc Toan (2002)
- Giang Thi Xuyen (2002)
- Huynh Loi (2008)
- Pham Ngoc Toan (2010)
The study of management
accounting systems in enterprises
within a specific sectors
-Pham Thi Kim Van (2002)
-Nguyen Van Bao (2002)
-Luu Thi Hang Nga (2004)
-Duong Thi Mai Ha Tram (2004)
-Nguyen Thanh Qui (2004)
-Pham Thi Thuy (2007)
-Tran Van Hoi (2007)
-Van Thi Thai Thu (2008)
-Hoang Van Tuong (2010)
-Nguyen Quoc Thang (2011)
-Nguyen Hoan (2012)
-Vu Thi Kim Anh (2012)
-Nguyen Thi Ngọc Lan (2012)
- Nguyen Thi Minh Phuong (2013)
Figure 1.2: The studies of general management accounting and cost
management accounting in Vietnam in particular
In the studies of management accounting in specific industries, there are only eight
studies about cost management accounting. Most authors have noted that the cost
management accounting in Vietnam enterprises have not been taken seriously and
invested properly. Businesses mainly use the available financial accounting
system, rather than building a specified system of management accounting, to
provide information for management decisions of the business. The allocation of
indirect production costs are usually conducted in the subjective criterion of the
firm, management accounting reports are prepared primarily to serve the shortterm decisions rather than serving the strategic decisions of the enterprise. This
shows that Vietnam still experiencs a huge gap to other countries in Southeast
Asia in the formation of cost management accounting systems in enterprises.
Several limitation of these studies are:
- Very few studies have addressed the theoretical overview and, if only to stop at
an overview of the works in the country, no overview of the works in the world.
- The reasons why businesses are not investing in cost management accounting
systems have not been deeply researched, so the solutions are still general, not
specific to the characteristics of the businesses and sectors.
- There is no study conducted on cost management accounting in the plastics
companies, while these companies' retain the unique characteristics of
manufacturing enterprises, and addition to that is the specific characteristics of the
sector. Moreover, improvement of the efficiency of accounting systems, especially
cost management accounting, is very important for manufacturing companies in
plastics sector, especially in the context of today's stiff competition.
This is the "gap" that the author will deeply research in this thesis.
1.3. Research questions
220.127.116.11 History and development of cost management accounting
Research objectives of the thesis are specified by the following research questions:
Cost management accounting is growing and constantly changing according to the
context of history. Although cost management accounting appear primitively in
13th, 14th century in Britain and America, but not until the 19th century, the cost
management accounting witness an outstanding development with a series of
invention in the field.
- Research Question 1: What rationale for accounting management in general and
and cost management accounting in particular has been growing in the world and
- Research Question 2: What is the status of cost management accounting of the
plastic joint stock company listed on the Vietnam stock market now?
- Research Question 3: What is the reason of the application or non-application of
cost management accounting at the plastic joint stock company listed on the
Vietnam stock market Vietnam?
- Research Question 4: What should be the solution to cost management
accounting at the plastic joint stock company of Vietnam to built or complete in
accordance with the operational characteristics of the companies and meet
information needs of managers in its current condition?
1.4. Research methods
The thesis will be implemented on the basis of application of quantitative
combined with qualitative methods to analyse the application of cost management
accounting systems in the listed plastic joint stock companies. The collected
quantitative data will be processed using the statistical metrics measurement and
synthesis. The qualitative data gathered from the interviews will be handled by
analyzing the content.
LITERATURE REVIEW ON COST MANAGEMENT ACCOUNTING IN
2.1. The nature and role of cost management accounting in corporation
2.1.1. The nature of cost management accounting
18.104.22.168. The concept of cost management accounting
According to the authors, cost management accounting could be defined as the
cost accounting department in the accounting management system to provide
information on the cost for the need of corporate governance.
In the 20th century, progress in the theory of management accounting in general
and cost management accounting in particular happens quite slow, although the
business environment and production in this period is more volatile. However this
period observes a number of reviews and evaluation of different methods of cost
management accounting adopted. From which, studies have shown the
inadequacies of the traditional cost management accounting methods and a variety
of modern accounting methods was born.
This period also saw the US and the UK are no longer two nations "dominance" in
providing the theories and practices for most of the cost management accounting
for the world. When Japan introduced two important innovations which are the
method of determining the target cost and the Kaizen method. 21st century,
although the corporate governance system develop but management accounting
has not changed from the last century.
2.1.2. The role of management accounting in business costs
The purpose of accounting is to serve the managers, therefore, the role of cost
management accounting is always associated with the role of managers in the
organization. In the process of pursuing the objectives of an organization,
managers must make basic operational decisions such as planning, guiding,
promoting and controlling staff. In fact, the information of cost management
accounting plays an essential role for the managers to make decisions in the
planning process, guiding, promoting and controlling.
2.2. Contents of cost management accounting
In order to monitor and control the cost of an organization, it is necessary to know
the contents of cost management accounting within the organization. In this thesis,
to assist the study and assessment of cost management accounting in the plastic
joint stock company listed in Chapter 3, in this chapter the author will summarize
the contents of management accounting by five major components: (1) the
classification of costs and how they are used; (2) Construct norms and estimating
costs for monitoring and controlling expenses incurred on the basis of the
classified costs to meet the requirements of managers; (3) Determine the cost for
each subject in order to calculate the exact costs of each specific subject; And on
that basis (4) analyse the variation of cost to control cost, and (5) analyse the cost
information to serve the needs of decision making of managers.
2.3. Status of the application of cost management accounting in enterprises in
several countries around the world and lessons for Vietnam
Status of the application of management accounting in general and cost
management accounting in particular in several countries around the world have
been presented in detail in Chapter 1. In the opinion of the author, the learning and
applying the cost management accounting systems from other countries also need
time and routine, and taking advantage of the follower, Vietnam also need to study
the techniques of cost management accounting to find a shortcut and catch up.
Initially, when the cost management accounting system are relatively simple,
Vietnam should learn the experience of cost management accounting from the UK,
USA and Japan. These are countries where the cost management accounting
develop both theoretical and practical, at the same time, learning from the
countries in the region whose characteristics quite similar to Vietnam.
From the experience of other countries, the development of cost management
accounting in manufacturing enterprises in Vietnam should aim to be flexible,
efficient and ensure maximum autonomy within the enterprise. Foremost,
enterprises need to recognize that an efficient system of cost management
accounting is crucial for sustainable development and competitive business in the
current turbulent environment, not only to meet the regulations.
STATUS OF COST MANAGEMENT ACCOUNTING IN LISTED
PLASTICS CORPORATION IN VIETNAM STOCK MARKET
3.1. The basic characteristics of Vietnam's plastic industry
3.2. Current status of cost management accounting in the plastic joint stock
company listed on the Vietnam stock market
In the summary of the survey (Appendix 01C), we can see the current status of
cost management accounting in the plastic listed joint stock companies as follows:
3.2.1. Classification of costs
According to the survey, currently 100% of the listed plastic companies conduct
clasification of business costs base on economic content and on purpose, usage of
the cost. Beside the two costs classifications above, the company does not use any
other classification, especially the classifications to serve the needs of corporate
3.2.2. Cost norms and cost estimation
22.214.171.124. Constructing costs norm
Direct materials costs
Because direct materials costs (plastic resin) accounted for a large proportion of
the total production cost of the company, 100% listed plastic companies construct
consumption norms based on technical norms of direct materials for each product
and control these norms strictly. Consumption norms of direct materials (plastic
resin kg / kg of plastic finished products) are built by technical department base on
world standards of plastic products. The review of direct materials consumption
norms is done quite often for each machine. Listed plastic corporations also
encourage material savings by specifying materials savings bonus for each
workshop. Most companies have not developed material price norms. Only Rang
Dong Plastic Company undertook construction of the unit price for materials
based on raw material prices for 3 consecutive months (Appendix 01C, 04).
Direct labor cost
Most listed plastic companies conduct labor costs norms per 1 kilogram / tonne of
finished plastic (33.33% of the companies apply) or the quantity of finished plastic
products (55.56%), in fact this is the contracted cost of labor for factories,
General production cost
For the materials cost and tools and supplies used in common for factory,
companies mainly contract the quantity for the workshop. For the electricity cost,
66.67% of the companies construct power consumption norms according to the
machine design. Other costs, such as depreciation expense of machinery and
buildings, wage costs and water costs for production do not have norms
constructed (Annex 01C, 02).
Selling, general and administrative expenses
Except for the gasoline cost which is built according to the consumption norms of
car design, other costs such as tools and supplies used for sales and administration,
cost of electricity, water, telephone, advertising costs, marketing expenses and per
diem are contracted to each department. Other costs related to sales and
administration do not have norms constructed.
accounting and cost calculation is the product groups in each workshop,
production cost and price are determined per ton or kilogram of plastic products in
the same ranges in each workshops. The prodcution costs are aggregated on
account 621, 622, 627 details for each workshop, then transferred to account 154
at the end of period to calculate the cost of completed products/product groups.
126.96.36.199. Costs estimation
For evaluation of work on progress, with characteristics of plastic products are
"asphalted"product, so all companies determine the value of work in progress by
the cost of direct materials. Up to 71.43% of the respondents say that the large
difference of work on progress between periods is depending on the demand and
orders in each period.
Survey results of the listed plastics companies show the current production
schedule of the company is quite passive and depend on the orders of customers,
most companies are not proactive in production planning. As many as 66.67% of
companies do not conduct production planning while the production planning is
the basis for the construction of the production costs. Besides the plastics company
only built the cost norms for a few basic expenses, thus the cost estimation is
virtually undone. Companies producing massive products such as Tien Phong
Plastic, Dong A Plastic, do not conduct complete cost estimation, but only stop at
estimating the volume of direct raw material purchased base on the reserve policy
of raw material inventory at the average demand of plastic for three months. At
companies, which produce accord to orders as Rang Dong Plastic Company, Tan
Tien Plastic, Tan Phu Plastic, Vinh Packaging, Saigon Plastic, have conducted the
estimation for each order to quote prices for customers and to monitor the
production process. Besides, Rang Dong Plastic Company also conducted to
estimate for overall year. General estimate is made for the whole company to
compare actual data and the estimates for the year.
3.2.3. Determine cost for each group
188.8.131.52. Determining costs for product/product group
Plastic corporations record each kind of production costs, then consolidate
production costs, evaluate works in progress from that pricing completed
products/product groups. At the plastic companies, each workshop usually
produce different product/product group. At Tien Phong Plastic and Binh Minh
Plastic, u.PVC tube products with various diameter and size are produced on the
same production line with closed loop system forming the finished product. In
each resize time, workers only need to replace the mould in the production line,
similar to the process of production of HDPE and PP-R plastic pipe. For
supplementary products such as flange pipe, the production consists of two phases:
(1) Plastic embryonic stage through a closed technology chain technology and (2)
drill and screw on through the lathe. With these features, the object of cost
For the calculation of price, in the Tien Phong and Binh Minh Plastic and others
plastic firms, the pricing objects are group of finished product (u.PVC pipe, HDPE
plastic pipe. ..different size), these product groups are measured by kilograms or
tons for pricing, then based on the technical specifications of each product to
calculate the price for each product . Costing method is the actual cost method.
After evaluating cost for each product category, the companies will perform an
aggregate list of price of all finished products.
184.108.40.206. Identify cost for other objects
All costs unrelated to the production process are gathered to the selling and
administration expenses. The determination of cost for other objects have not been made.
3.2.4. Cost variation analysis for cost control
At the workshops, with regard to the volatility of direct raw materials
consumption, due to the significancy of direct raw material cost in the total cost of
the company, the workshops monitor and report fairly regular the consumption of
material in reality versus technical norms. Because labor costs are constructed as
norms per kg of plastic finished products to pay for the employees of each
workshop production, there is no difference between the labor costs actually
incurred versus expected. At each workshop, timesheet to track the working time
of individual workers is used, but only for calculating salary for each individual,
and has not been used to analyze labor productivity fluctuations and labor costs
variations in the period. There is norms for the cost of electricity and water used
for production, but essentially the utility costs are contracted for each workshop.
In fact companies are gathering utility costs actually incurred during the period to
the cost of the company, rather than using the actual level compare to norms to
analyze fluctuations in period. In addition, listed plastic corporations are divided
to functional departments. Although each year, departments are required to report
to the managers on assigned tasks and the implementation of these tasks, the cost
to evaluate management responsibilities is the direct costs incurred at the
department under their control.
expenses are variable in nature, such as commissions, phone costs are set in
proportion to the revenue or in the form of contracting while these costs are from
3.2.5. Cost information analysis for business decisions
Survey results show that the listed plastic corporations have never used data from
the accounting system to analyze and determine breakeven points, or plan revenue
and profits growth in the event of shareholders' meeting. The plan of revenue and
profits growth are made through estimates from the experience of the manager.
Also the listed plastic companies have never used the information from the
accounting system to consider between to self-produce or purchase, to accept or
refuse an order, to invest in a new production line, all these decisions are largely
base on the needs of growth and development strategy of the company.
In each plastic firm, there is usually an electro-mechanical workshop. Managers
agreed that most of the factories do not reach its full capacity and not really
effective, but these plastic firms did not use the cost information to make decisions
of maintain or remove, or change the management method to enhance the
performance of the electro-mechanical workshop. Large firms, such as Tien Phong
and Binh Minh Plastic, sometime receive orders for special products (in term of
size, degree of difficulty) which can not be produced massively as conventional
products, but require a separate manufacturing process. However, the companies
still apply the normal method to calculate the price (plastic resin cost plus about 17
million/tonne of finished plastic).
3.3. Evaluate the actual status of costs management accounting in the plastic
companies listed on stock market
Besides the advantages gained, cost management accounting in listed plastics
companies exists some limitations:
The current classification of cost does not support the cost administration of the
enterprise and mainly benefits the pricing of completed product. In addition, the
identification of sources of cost in accordance with each type of expense should be
paid enough attention, because this work is the basis for the formation of norms
and reasonable cost estimation. It also helps companies determine the exact cost
charged for each object. As for selling and administration expenses, some
Construction of norms and estimation of manufaturing factors cost in the plastic
firms has not been done comprehensively and effectively: The cost norms has only
been established for the cost of direct materials and based on technical norms.
Although the technical norms for material cost has been constructed, most
companies have not yet estimated direct material cost. Other costs have not been
established norms and estimates.
The determination of cost for charged objects is inaccurate and do not meet the
requirements of corporate governance. Plastic corporations only determine the cost
of completed products / product groups through the determination of cost of
production and apply the cost valuation methods in accordance with the actual
cost, in which overhead production costs is mainly allocated according to the cost
of direct materials or cost of key raw materials while each element of overhead
production costs has different sources of costs and need a different allocating
criteria. According to the author, the use of only one allocation criteria like that is
quite simple and unreasonable. In addition, when determine the value of endingperiod work-in-progress, all companies use the cost of the key raw materials or the
cost of direct material, though work-in-progress of the companies includes, in
addition to the cost of the key raw materials, auxiliary materials, labor costs and
other expenses incurred in the workshop, these costs account for over 10% of the
value of work-in-progress. Besides, for the purpose of corporate governance, in
the author’s opinion, the plastic companies only determine cost for its products is
not enough. The determination of the cost for other charged objects as for each
order, each customer or individual departments in order to have an accurate
assessment for each charged objects have not been implemented by them.
Most of the costs variation has not been analyzed for control costs purpose: In
addition to the analysis of the variation of materials cost is conducted quite often
to control the materials cost, other costs incur in companies such as direct labor
costs, overhead costs of production, sales and administration cost has not been
tracked and analyzed their fluctuations during the period. In each department of
the company, although the works reports is done periodically but they are
superficial. The evaluation criteria are incomplete according to jobs delegated to
the employees. Assignment of responsibility for cost control and evaluate the
implementation of cost control costs through variation analysis of each department
in the plastic companies has not been performed.
Managers at all levels in the listed plastic companies virtually have not used cost
analysis to make decisions: It can be seen that if the listed plastic companies do
not estimate costs in a complete and accurate manner and specify costs for each
contract, each customer, ... they can not closely control for costs for each object,
and also can not assess the profitability of each object. For mechanic-electric
workshops, an ineffective operation, the plastic companies also do not use cost
information to decide to restructure this department. It can be seen that the cost
analysis in the listed plastic companies have not been made to serve the short-term
decisions of the companies. For long-term decisions of the administrators, such as
a new asset investment, manufacturing expansion, assets hire/ purchase ... the cost
analysis has not been used to make decisions, and managers make investment
decisions primarily base on the size of the business development, customer orders,
current financial ability of the business or take advantage of state incentives for
ORIENTATION AND SOLUTIONS TO IMPROVE THE COST
MANAGEMENT ACCOUNTING IN PLASTICS CORPORATION LISTED
ON THE VIETNAM STOCK MARKET
4.1. The need for information and the principles to complete cost
management accounting in the plastic corporation listed on the Vietnam stock
In accordance with the characteristics of production and business activities
Able to provide diverse information about the cost to the decision making
process of the managemers
Designed on the basis of the benefits – costs analysis
4.2. The solutions to complete the cost management accounting in plastic
companies listed on the Vietnam stock market
4.2.1. Classification of costs
The author proposes the classification of costs according to the relationship with
the activity level and the inductive ability to the charged object.
Classification of costs according to the relationship with the activity level,
the costs of the listed plastic companies will be classified as variable cost, fixed
cost, and mixed cost based on multiple sources of the cost.
Classification according to inductive ability of the charged objects
The classification of costs into direct costs and indirect costs for those who bear
the costs such as products line, orders, customers, factories or branches, stores, can
help the managers evaluate the performance of each object of interest, then to
make the decision accordingly.
4.2.2. Norms construction and cost estimation
220.127.116.11. Norms construction
For the norms of direct materials cost, in addition to the quantity norms, it is
necessary to set the price norms of raw materials. However, as the unit prices of
materials fluctuate continuously and depend heavily on the volatility of world
market prices for plastic resins, so the listed plastic companies may not be able to
set the unit price of materials, as a basis to determine the cost norms of materials.
With this feature, the listed plastic companies can determine the input material
prices if the company uses hedging instruments. On this basis, the authors propose
that expected unit price for raw materials purchased for use in production can be
determined by limiting the risk of input materials costs through the use of
derivative instruments. Based on the experience of the international plastic
companies in controlling the volatile input costs, the authors expects that the listed
plastic companies, foremost, the companies with large market share in industries
such as Tien Phong Plastics, Binh Minh Plastics, Tan Tien Plastic can examine the
purchase of matertials under futures contracts. For the overhead production cost
norms, sales and administration cost will be established based on historical costs
incurred from the previous periods and the expected to occur in this period,
calculated by the departments in the company and the board of executives. Based
on the cost classification into variable and fixed costs, these costs will be set up for
each sources of cost such as products, manufacturing workshops, manufacturing
areas, orders, customers or departments within the company.
18.104.22.168. Cost estimation
Pursuant to calculate the estimated cost of production is the production estimates
of plastics companies. Production estimates are made based on information
provided by the sales department, business department within the company
providing forecasting domestic and foreign markets, production figures of the
previous periods, the product storage in this period and the expected consumption
of products, thereby determining the number of products to be manufactured in the
the supplementary component of salary of sales staff, the cost of electricity, water,
stationery costs, depreciation of fixed assets is considered a fixed cost of sales
department in the listed plastic companies.
- Direct materials cost estimate: Used to determine the type of materials to
purchase in the period to ensure the production plan of the company. Direct
materials cost estimate is built on the following basis: Based on the number of
products to be manufactured in the period, provided by the sales department base
on information of plastic market and statistics on plastic products consumption in
the previous periods, the consumption norms of raw materials for the production
of each product provided by the technical department, the materials storage norm
at the end of the period providing by the sales department and the price of each
type of materials provided by the sales department.
- Direct labor cost estimate: Constructed by the listed plastic companies base on
the demands of prodution to ensure the stability of the company's manufacturing
operation. Estimates of direct labor costs are established on the basis of: Norms of
labor hours and unit price of each type of labor, supplied by the technical
Administration cost estimate: is mainly fixed costs except for the customer
relationship cost is based on the number of contracts, the cost of fuel for cars is
determined according to the distance travel and telephone charges with source is
the number of calls.
4.2.3. Determining the cost for charged objects
22.214.171.124. For the charged object is the product
a) For the products that the plastic companies is considering to put into
production and sales
Apply the method of determining costs following a target for the companies
those are characterized as price accepted firm and in the research for new
Apply the method of determining costs following the life cycle of products for
Nano Molecular plastic pipe of Tien Phong Plastic.
- Overhead production cost estimate: As stated in the classification of costs
section, overhead production costs in the company common stock plastic covers
the cost of electricity, water used to operate the production lines of plastic will
change according to the number of hours of operation of the machine, the cost of
restarting production lines vary with the number of times the boot chain when
changing the size / type of product produced. Other costs incurred for shared
production (in may have the utility costs for lighting, fan, air conditioning or
water) are considered fixed costs. Estimates of production costs generally are
established for each type of product, every production workshops.
Currently all companies determine charged object as manufactued product and
calculate the cost of finished products. However, the calculation of products’ costs
is inaccurate. Therefore, the company should consider to apply methods of
determining operating costs (ABC) to calculate the exact cost of mold, cost of
restart the line for the lines of product that actually incurred these costs.
Selling cost estimation of plastic companies often includes: per diem varies
together with order quantity, cost of sample offered is based on execution time of
samples, marketing costs is determined as per number of orders, shipping costs is
calculated on distance transport, commission is calculated as percentage on sales
consumption, telephone and internet cost is based on the number of orders, salaries
for receiving orders staff and sales staff is calculated on sales, salaries of customer
care staff is based on the number of followed contracts (variable component of
salary). Other costs incurr in the sales department are basic component of salary,
- After the costs of mold and the cost of restart production lines have been defined
for each product type, accountant will calculate the cost for each type of
For the product that the plastic companies have been producing and selling
- The cost of mold, the cost of restart production lines are defined as operating at
the level of product type, which is related to each line of product and regardless of
the number of produced products. The source of this cost is the number of of
manufactured product types.
126.96.36.199. For the charged object is each order, each customer, each functional
departments in the plastic companies
number of executed orders is determined base on sales of the orders.
Transportation costs includes fuel cost and vehicle depreciation. Fuel costs is
calculated on shipping distance of the orders. Depreciation transportation company
currently calculated by straight line method at Rang Dong Plastic, and thus
determined as an organization maintenance cost. Brokerage commissions is
according to the sales of the orders. The cost of telephone and internet is
calculated on the number of orders.
In the opinion of the author, the listed plastic companies should recognize the
charged object is not only the product / group of products but also any object that
the companies would like to learn about its cost. On this basis, the authors propose
applying the method of activities based on costing (ABC) to determine costs for
each type of expense. Specifically:
Charged object is order
The costs incurred in the manufacturing process of the order: are the costs
comprise the cost of good sold determined directly for each order. These costs will
be determined by the current calculation of the company.
After-sales service: product warranty costs per sales orders. The
remaining costs incurred in sales and administration is defined as organization
Charged object is each customer
The costs incurred outside of the manufacturing process to service the order:
Currently, these costs in the plastic packaging company can be divided into two
groups: sales expenses and administrative expenses. Therefore, it is necessary to
identify each cost element incurred with an appropriate resources to determine cost
for each order according to the ABC method. Specifically:
- Plastic companies need to determine the cost of service for each customer to
assess the economic effects that each client brings to the company, and from that
make reasonable customer care policies. With the costs incurred in sales and
administration, the plastic corporations should determine these costs at the level of
customer, are made for each customer, specifically:
- The costs in sales and administration cost are defined as operating at the level of
product batch: to be done at each time an order is processed regardless of the
- Customer relationship cost accounts for a sizeable portion of the out-ofproduction cost in the listed plastic companies. Customer relationship cost should
be calculated for each customer according to the number of executed contracts.
Based on the order fulfillment process at Rang Dong Plastic, th out-of-production
cost will be classified into activity group as (1) receiving orders, (2) order
execution, (3) after-sales service.
- Cost of customer care personnel: Includes fixed salaries and wages based on the
number of responsible contracts. Fixed salary is accounted as organization
Receiving orders: staff costs is applicable for employees receiving the orders, and
include fixed monthly salaries and wages paid according to the number of
executed orders. Fixed salary is accounted as organization maintenance cost.
Wages paid according to the number of executed orders is determined as a
percentge on of sales of the orders. Per diem is calculated on the number of
executed orders. Sample cost is the cost incurred when performing product test by
sending it to customers. Because of the complexity of samples, this cost should be
calculated according to the execution time of the samples. Marketing costs is
according to the quantity of the orders.
Order execution: Staff cost, assigned for the transporters, includes fixed
monthly salaries and wages paid according to the volume of work done. Fixed
salary is accounted as organization maintenance cost. Wages paid according to the
Charged object is functional department
Currently, the plastic corporations determine the cost for the manufacturing
workshops only and not for other departments. Thus, the sales and administration
costs should be determined at level departments level, specified to each office.
To determine the performance of each department, the company should (1)
identify the direct costs incurred in the department, then (2) reporting the cost of
Determine cost for each department: labour cost, depreciation and
amortization in each department will be determined directly for each department;
Depreciation and amortization share by departments (car) is determined for each
department under the registered schedule to use the car / vehicle; The cost of tools
and supplies, internet, electricity and water for each department determined by the
norms and expense budget set for each department.
- Direct labor cost: causes of differences are analyzed according to two factors as
fluctuations in labor rates and fluctuations in labor efficiency. Based on these
reasons, the company will make the necessary adjustments.
After determining the cost, departments report its monthly cost
Thus, the application of ABC helps listed plastic companies determine the cost
accurately for each charged subject in accordance with specific production and
administration of each company. With regard to the organization of the accounting
system, the author propose that the listed plastic companies in Vietnam should
apply the method of determining costs follow operation in line with the accounting
system of the company. To avoid disturbance to the formulation and publication of
financial statements, the current accounting system should still be used in parallel
with cost management accounting systems to provide information for managers.
188.8.131.52. Applying the method of estimating the equivalent output of which use
the first in - first out to determine the value of work-in-progress
Only with the first in - first out method, the company can identify the cost of each
period to control costs. According to this method, the cost of direct materials / key
raw materials are accounted 100% for the value of work-in-progress just as the
current methods applied in plastic packaging companies, but this cost is split to
cost incurred in prior period and cost incurred in this period, which will help
companies clearly assess the control of direct raw materials cost in each period in
the workshop manufaturing packing. For processing expenses, the company will
rely on the technical and economic norms of the manufacturing process of plastic
packaging with a two-stage of film grafting and forming bag, to estimate the
degree of completion of work-in-progress . The processing costs is also splitted to
parts that have arisen in the previous period and incurred during this period. From
which, the companies producing plastic packaging can report production costs for
packaging workshops to review the situation of production costs incurred in
workshops in each month.
4.2.4. Cost variance analysis for costs control
- Direct materials cost: causes of differences (fluctuating costs) are analyzed
according to two factors as fluctuations in the price of raw materials and
fluctuations in raw material consumption. After analyzing the exact causes,
reasonable adjustment measures can be determined.
- Overhead production costs: in order to serve the cost variance analysis to better
control the cost of the listed plastic companies listed, the authors propose these
companies consider a flexible estimate for production costs of the company.
- Sales and administration cost: Similar to the overhead production costs, cost of
sales and administration also need a flexible estimate to do the analysis, evaluation
and cost control.
4. 2.5. Analyze cost information for business decisions
In terms of theory, analysis of cost information is to serve the needs of decisionmaking in business as purchased or produced products, refuse or accept the order,
remove a product or a business unit. Practices as describe and analyse in Section
3.2.5, Chapter 3, there are business units in companies operated inefficiently, but
remained in in the companies’strucutre. Cost management accounting enables
managers to make decisions in order to reorient the operating direction of these
ineffective parts. As in Tien Phong Plastic, the mechanic-electric factory is
operating with low efficiency, so the authors propose to restructure mechanicelectric factory in two directions: remove the mechanic-electric factory or convert
to decentralize management of the mechanic-electric factory from cost center into
4.3. Conditions of solutions implementation
4.3.1. From the State and authorities
The state should increase support companies in personnel training, research,
development and implementation of management accounting systems. Besides, the
government should encourage and create favorable conditions for companies with
maximum autonomy in setting up a system of management accounting costs in
accordance with the operational characteristics of the company, should not
interfere too deep in the system by regulations, rigid policies.
About the Vietnam Accounting Association and Vietnam Plastics Association,
these two organizations present virtually no informational connection. Plastic
Association open training courses specialized in the manufacture of plastics quite
regular but no training in accounting, particularly in cost management accounting
for plastic business. Therefore, the two organizations should be associated closely
to improve the cost management accounting for plastic enterprises, thereby
helping these plastic corporation companies aware of the role and effects cost
management accounting in corporate governance.
About accounting system, plastic companies need to study for an accounting
model to be in accordance with the characteristics of its own business
economically and efficiently, ensure to provide appropriate accounting data for the
outside parties and providing accounting information for corporate governance
needs in a timely manner.
For accounting training institutions, these instituitions should update the
knowledge of modern cost management accounting, improve educational
programs in cost management accounting, promote the combination of theory
teaching and practice, build virtual accounting department to familiarize students
with the actual situation. Besides, short-term training courses in cost management
accounting should also be organized for those who are working in accounting to
participate and improve their knowledge in cost management accounting.
4.3.2. From the listed plastic joint stock companies
To build a management accounting system that is effective, consistent with
the scale and type of production, the company needed to improve the process and
quality management system, to establish the design orientation and cost
management accounting model construction appropriate.
To implement the solutions of cost management accounting, first the listed
plastic company should decentralize its financial management explicitly, empower
and delegate the cost control responsibility for managers of each department. The
departments should form the cost center, and produce cost reports periodically.
Management accounting system currently does not have a general legal
regulations regarding the form and contents of the report. So companies need to
research and develop a specific system of management accounting criteria to fit
with corporate governance objectives. These criteria must ensure comparability
between periods, which helps managers assess the accuracy of the actual operation
situation of the company. During the integration process, enterprises can refer to
the report model, the criteria system of companies, multinational corporations to
study and apply for their particular company appropriately.
About information technology, investment in a suitable information
technology system will be prequisite to implement an effective system of cost
management accounting in the company. Currently many companies have yet to
use an unified administration software system, and only apply a specialized
software for accounting work. Therefore the data provided are usually only
accounting data, there is no cross data from different departments of the
companies. This leads to the data provided for managers are not accurate and
timely. Therefore, companies need to research and invest in business management
software, including integrated cost management accounting software to guarantee
to provide appropriate accounting information to managers.
With regard to the accountant staff, companies need to build a workforce not
only professional but also have a solid understanding of the business activities of
enterprises to be able to accurately analyse and assess the accounting information
provided to managers, determine the exact cost of the charged object, using
appropriate criteria for cost allocation, accurately calculate product cost to facilate
the determination of selling price. In addition, the accountant should be able to use
the tools of the modern cost management accounting to control the costs effective.
In recent years, the general context of global economy difficulties has significantly
affected the manufacturing enterprises in Vietnam. For plastics, although
identified as one of the strategic sectors by the government and has been approved
the development plan until 2020 by the Ministry of Industry and Trade, the
plastics companies, in particular is the listed corporations, face fierce competition
from domestic and foreign companies in the industry, also to overcome the
difficulties that all companies facing in the global crisis. More than ever, the
development or strengthening the cost management accounting system is an urgent
need for plastic companies, to help companies better control incurred costs and
support the managers in making business decisions. Therefore, the thesis research
and offer solutions to build a system of cost management accounting to match the
characteristics of the operation of listed plastic companies.
The thesis studies the basic theoretical framework of cost management accounting,
thereby learn and evaluate methods of cost management accounting adopted by
international companies, as a basis for research and offer solutions for the listed
By using the survey method, sending questionnaires and analyse the content of the
interview at the listed plastics companies, the thesis is to assess the current status
of cost management accounting in the plastics corporation listed on the Vietnam
stock market, from which analyse the limitations in the current accounting system
of the companies.
On this basis, the thesis proposes solutions to help the listed plastic companies
build a system of cost management accounting that are truly effective and
consistent with the characteristics of the companies.