Tài liệu Model of the cost management accounting in the cement manufacturing factory in vietnam

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1 2 INTRODUCTION 1. NECESSITY OF THE THESIS In the current stage of development of Vietnam's economy, businesses have faced with competitive pressures of the business units in the same industry and foreign investment companies.Vietnamese businesses need to use existing resources effectively and take full advantage of the positive impact of external forces such as supporting policies from Government: credit policy, investment policy in key sectors. However, promoting internal forces is still the effective solution in order to help companies become more active in their orientation. Promotion effective governance of enterprise as promotion of human resources, of intellectual sources is a key to be able to continue to develop the material resources of the enterprise. How can businesses apply appropriately management tools for corporate governance working effectively; that is a big question. Accounting in general and management accounting in particular play a critical role in providing useful information for administrators to manage resources and make the most appropriate decisions. Vietnamese cement production sector has developed in association with the growth up and urbanization speed of the country. After a period of strong growth, from 2010 to now, the cement manufacturing enterprises in Vietnam have stood before the oversupply situation. Line series, the new plants have operated in moderation, loss and even stopping production because of rising costs, their products are not sold. The difficulty of the cement industry started in 2010. From that time, cement produced in Vietnam has consistently been sold at the lowest price in comparison with countries in ASEAN region; particularly its price is always below 50 USD/ton while average price of cement in the region of 65-75 USD /ton. With a mission of stabilizing the market price and supply, contributing to curbing inflation, stabilizing macro economy, from 2008 to the present, the price of cement has increased by only 30% while the price of coal, the main material to produce fuel cement, has increased 4 times, the price of electricity, gas, oil are also adjusted continuously. Late in 2010, the cement businesses under the pressure of increased exchange rate between the dollar and VNĐ, interest rates soared so the cost of cement price increased by 22-30%. Big cement producers such as Bim Son Cement; Nghi Son Cement; Cong Thanh Cement; Hoang Mai Cement, Hoang Thach Cement ... have constantly applying innovation and progressive techniques to reduce input costs while improving quality and production output. However, those companies have not used economic management tools effectively to control costs. The question for managers is how to promote the existing resources, improve competitiveness in order to survive and thrive during this difficult period. Promoting the role of providing information management accounting for decision-making processes of the internal managers of cement production enterprises is one of the effective solutions. On the other hand, the author would like to develop the application of management accounting in the specific context of the Vietnamese cement production enterprises, then build theory (factors impacting the management accounting model) and choose modern model to apply in accordance with the cement production enterprises in Vietnam. From the above reasons, the author has chosen the theme: "Building a model of cost accounting in cement production enterprises of Vietnam" as the subject of my doctoral dissertation to be able to improve capacity of scientific research and also help cement manufacturing industry manage more efficiently their costs. 2. OVERVIEW OF RESEARCH The studies mention the fundamental problems of cost accounting. Scientists have studied in depth the methods to cure difficulties in controlling expenses separately. There was a study which oriented cost accounting model of each type of enterprise, has proved that the design of management accounting model for businesses needs basing on direct factors such as: the organizational structure; the interdependence between departments; the demand for information on the cost of the CFO; the technical process of production; facilities perform accounting work; the level of accounting personnel; The legal environment for manufacturing industries. The above works only solve two aspects which are general orientation for cost management accounting model and direct factors mentioned above. The study of foreign scientists goes deeply on the application of modern administration method such as ABC, ABM, BSC, the method of determining the cost norms, the model allocation of overhead cost of production ... The research has focused on management accounting for business associated with a specific business sector towards filling gaps. The content is built like building apparatus of cost management accounting, putting in a cost estimate and cost norms, methods of determining implementation cost, cost variance analysis. However, no public works design the model of management accounting for a particular business or an industry. From gaps in research projects, the author wants to continue searching on the effectiveness of management accounting in corporate governance. Theorically, the author find out relations between scientific management accounting and corporate governance through analysis of the demand of information of adminitrators, is the basis for building the model of cost management accounting for businesses. At a practical level, through research on the status of management accounting in cement production enterprises today, the information needs of all levels of corporate governance, the author completes the model management accounting for cement production enterprises in Vietnam with two factors: the cost accounting apparatus combined with technology of production cost information (content and implementing process, method, and techniques of cost management accounting) in order to achieve the scientific product with high applicability. 3. PURPOSE AND SCOPE OF STUDY 3.1. Research purposes The purpose of the thesis is to generalize theories of cost management accounting in businesses and characteristics of the cement manufacturing in Vietnam, and then build models of management accounting applying for the cement production enterprises in Vietnam. To achieve the purposes the author searches on model of cost management accounting with modern methods, the lessons learned from the developed countries combined with specific studies of the cement manufacturing industry in Vietnam. 3.2. Scope of the study The author has investigated the accounting information of cost management accounting from the Vietnamese cement production businesses nationally with 3 4 representative sample of 71 firms. The enterprises selected represent geographical area, firm size, type of ownership. With the detailed data, the author focuses on searching in the cement business representing forms of ownership and model of corporate governance, type of cement production technology including: Nghi Son cement JSC; Bim Son cement JSC; Tam Diep cement JSC; Tien Son cement JSC; Hai Phong Cement Company; Ninh Binh Co., Ltd. 27/7. The scope of the study period is limited to 5 years (from 2009 to 2013) in order to recognize the newest features added in the cost management accounting in enterprises. 4. SUBJECTS AND METHODS 4.1. Study subjects: Study on model cost management accounting in production enterprises in general and the businesses of cement production in Vietnam. 4.2. Research Methodology Research Methodology: To accomplish the information gathering process the author used specific qualitative research methods are as follows: * Documentation lookup method: The author uses the method to access documents in theoretical research on issues related to research content from the source: The system of specialized monographs compiled, specialized magazines at home and abroad, scientific research works such as theses, dissertations, scientific subjects ... * Methods of collecting primary information: The primary information will be collected through a survey of businesses. Survey: The survey questionnaire was designed to gather information from businesses about: The size and characteristics of managerial competence and control procedures for cost information; Technological characteristics of production line; production model, the reality of management accounting in businesses, model of management accounting engine; the status and content of management accounting as cost estimates… Consult experts: Expert consultation will be undertaken through consultation with specialists (the researcher experts have a deep understanding of cost accounting) to create a system of theoretical models of cost management accounting for businesses and for the cement industry in particular. - Methods of synthesis and processing information. + Information and documents obtained are divided into 2 groups: theoretical, practical to systematize and deploy writting arguments and the state of the industry. + The information and data collected from the survey questionnaire and in-depth interviews is the basis for the author to use statistical methods for each content; and then describe the current status of management accounting systems of cement production enterprises in Vietnam. Data collected from the survey will be used to analyze and then to confirm factors impacting and the appropriateness of the model selected for cement production enterprises in Vietnam. Approach the research content: To accomplish the research objectives the author will conduct research under the following workflows: The author reviews the research studies and theoretical basis of cost, of cost management accounting. Next, the author designs general model of cost management accounting for businesses and gives views of structure of the model. Then, the author searchest and carries out surveys the state of cement production enterprises nowsaday. Characteristics and factors of internal management of the Vietnamese cement businesses are orientation for the author to select suitable model of cost management accouting for cement production enterprises inVietnam. 5. CONTRIBUTION OF THE THESIS The dissertation is expected to contribute the following: Theoretical: The thesis presents the model of cost management accounting in manufacturing enterprises in relation to cost management functions in business and cost information needs of administrators. The thesis presents three types of model of cost management accounting: separate models, combined models and hybrid models. At the same time the thesis states that management accounting model on theory is composed of the following factors: cost accounting management apparatus and technology of production cost information. Practical: The author presents the current status of management accounting at cement production enterprises in Vietnam with following content: methods being applied; factors affecting such as management apparatus, technological process of cement production. From that, the author builds a model of management accounting in accordance with the Vietnamese cement manufacturing companies. 6. STRUCTURE OF THE THESIS In addition to prescribed layout, thesis is structured in three chapters: Chapter 1: Rationale for model of cost management accounting in manufacturing enterprises Chapter 2: Current status of cost management accounting in cement production enterprises of Vietnam Chapter 3: Building a model of cost management accounting for cement production enterprises in Vietnam CHAPTER 1: RATIONALE FOR MODEL OF COST MANAGEMENT ACCOUNTING IN MANUFACTURING ENTERPRISES 1.1. The views and nature of cost management accounting model 1.1.1. The ideas of the model The concept of model Vietnamese dictionary as follows: "Material with same shape but shrinked a lot, simulating of structure and operation of other objects to present and research" or "method of brief expressing of essential characteristics of an object by one way to study that subject. "Structural models are applied in many research fields”. The model of structure is the model showing all internal components of material, phenomenon (not necessarily the phenomenon, the object is a system). In the opinion of 5 6 the author, cost management accounting model is belong to structural model generalizing the asynchronous elements as tools to control production and business costs. Thus, it is necessary to clarify elements and their relationships to identify specific patterns of cost management accounting model 1.1.2. The essence of the model of cost management accounting in production and business enterprises For interpreting the nature of cost management accounting model, the author approaches of: function of cost management in enterprises, then identify managers’ demand of cost information using as a basis for constructing process of cost management accounting. Cost management accounting model shows two elements including coordination of accounting personnel and cost management content, process and methods, applied to achieve the objectives of providing cost information for all levels of internal management. From concept given above, the model of cost management accounting consists of two basic components: cost management accounting apparatus and technology of production cost information (content, process and technical methods of accounting) 1.2. Requirements and principles of building cost management accounting model 1.2.1. Requirements of constructuring cost management accounting method. The model of management accounting constructured needs to ensure following requirements: - Provide timely and complete information as required by the internal management level authorized for each content costs, for each job, department, project, product orders. - Provide accurate information as requested by management executives. - The management accounting information provided to ensure the details. 1.2.2. The principles of building the cost managerial accounting model The model of cost management accounting is a tool providing information for the management of resources in the enterprise. Therefore, management accounting information provided is necessary to ensure reliability and practicability for internal management of businesses. When building the model of cost management accounting should follow the following principles: The objective principle: management accounting information provided has to reflect the reality of the economic transactions arising in businesses. The matching principle: Design the model, especially the personnel apparatus must perform in accordance with the characteristics of business and management skills of managers. The savings and efficiency principle: Applying the model of management accounting in businesses should be considered in the process of saving manpowers, utilizing the existing conditions in the enterprise. Coordination principles: accounting department undertook cost management and other departments within the enterprise should regularly exchange information in order to provide information for management accounting. 1.3. Factors affecting cost management accounting model Regulatory environment includes the system of laws and regulations of the state namely accounting act, accounting standards and circulars guiding direction for the accounting operations of the business. Management accounting needs to create a legal framework to guide management accounting specifically in the enterprises. Besides, there are some factors such as business environment; positive environmental information. The internal factors are the major determinants which help firms choose the model with the appropriate content to meet the multiple needs of their internal information. These are the factors that directly influence the process of building the cost management accounting model to provide useful information for management activities: operation field; management apparatus; technological processes; quality and human skills 1.4. Cost management accounting model in enterprises As confirmed in previous content, the nature of cost management accounting model on cost management perspective is the form of management accounting organization which is made up of the cost management accounting apparatus and technology of production cost information. The combination of these two factors can be done through three forms namely: Combined model is a model in which financial accounting and managerial accounting are coordinated in the same accounting system. Separate model is a model that financial accounting and managerial accounting are split. Mixture model is a model that accounting system has both financial accounting modules and managerial accounting modules of accounting apparatus and accounting work. 1.4.1. Model of cost management accounting apparatus. The organizational structure of the cost management accounting model: * Combined model of cost management accounting This model combines financial accounting and managerial accounting in a same accounting system. In terms of organizational structurr, the accounting model is not divided into financial accounting and managerial accounting separately; but only divided into separate parts performing partial accounting work assigned. Accountants in charge of each part do all work related both financial accounting and managerial accounting [21, p 28]. This model has the advantage of conveniency, easy operation and compact. However, this organization requires the organizers understand the qualifications and specific capacity of bookkeepers and must clearly identify the work of financial accounting and managerial accounting in each part. * Separate model of cost management accounting In the model, financial accounting is seperate from managerial acconting both in accounting apparatus and accounting work. Accounting apparatus in accordance with this model consists of two main parts which are financial accounting and managerial 7 8 accounting. The two parts may be in the same room or two function rooms. The financial accounting department has functions of recording transactions arising from economic units in the consolidated accounts and of presenting of financial statements complied with accounting regulation. The managerial accounting has function of receiving, processing and supplying information from the original document to meet the needs of all levels of management. It prepares detailed cost estimates; analysis, processing of information, and establish management accounting reports as requested by managers. The managerial accounting also provides information for the planning of production and help out managers in decision making [21, tr29]. * Mixture model of cost management accounting The model is a combination of the two ways of organizing combined model and separate model. With this model, some parts of managerial accounting are held separately from financial accounting, while some other parts are combined. This model has the advantage of making a stepping stone for companies that want to go straight up separate accounting model but the management level as well as the size is not enough to hold separation of managerial accounting 1.4.2. Technology and methods and means of production of cost information This is the second element of the cost management accounting model which are process, content, cost accounting methods and specific techniques of management accounting. They are applied to implement objectives of controlling costs and of providing cost information for decision-making processes in enterprises. 1.4.2.1. Classification of costs in manufacturing enterprises Classification of costs according to function: According to this classification, the cost is divided into production costs and external costs of production. This classification is used frequently in financial accounting for calculating product cost. The classification helps accountants control easily expenses incurred in different stages of production process, and from that connect responsibilities of managers with every location costs incurred. Classification of costs according to cost elements (according to the economic nature): Costs are divided into: cost of materials, the tools and instruments; labor costs; depreciation and amortization expense; external service costs; other expenses in cash ... This classification allows enterprises to control costs for each material and non-material resources consumption during production and then evaluate the effectiveness of using each resource for making timely adjustments. Classification of costs according to the relationship between costs and operation capacity: According to this classification, the costs incurred are divided into: fixed costs, variable costs and mixed costs. This classification is based on relationship between costs incurred and fluctuation level of production capacity. Classification of costs according to operation capacity is the basis for making operating decisions and business activities of enterprises. Classification of costs according to the relationship between costs and object for gathering costs: Cost structure under this classification includes: direct costs and indirect costs. This classification helps to collect and process cost information appropriately. With the direct costs, accountants directly determine and transfer entire costs for the object for gathering costs. For indirect costs, accountants need to gather all costs for objects then select appropriate allocation criteria for each object. Classification of costs according to the relationship between costs and the financial statements: Classification of costs according to this criterion, costs consist of product costs and period costs. This is the way of classification showing relationship between costs and financial statements. This classification indicates that not all costs incurred affect the profits and losses of the period that costs incurred. Classification allows an overall assessment of the value of assets and the operations of the business enterprise in a period, evaluates results and business operations in future periods. Classification of costs based on the level of executive control: According to this classification, the costs of business including: controllable and uncontrollable costs. The classification has important implications for the management responsibilities of each department so that businesses can assess management capability and responsibility of the individual for the costs incurred under their control. Classification for analysizing, comparing to choose the optimal business plan: To serve the information for decision-making processes at all levels of management in business, costs includes opportunity cost; differential costs; sunk costs ... These are costs that affect the business decisions of the enterprise and help administrator consider when selecting a business plan. 1.4.2.2. Construction norms and cost estimation in manufacturing enterprises Norms of cost Norms of cost is the standard for cost control and is the basis for the organization responsible accounting because norm cost is a measure to evaluate performance of responsibility centers and cost centers charge. The actual rate is used to compare the performance results, the difference between the implementation and the actual norm; it indicates deviations outside the normal operating conditions to guide managers check steps to find the exact cause in order to overcome disadvantages. Actual norm is the basis for the estimation. Ideal norms can only be achieved in the best condition; no machinery is broken, skilled employees work most effectively [16, tr139]. Constructing norms of costs: Norms of costs is effective tools to control costs. Construction norm cost has to base on system of economic and technical norms. Building norms of costs can apply statistics of experience method or technical and economic methods. Estimation of costs Estimation are the planning to use resources in a period, expressing as the expected details on the mobilization and use of production factors, the financial resources to ensure that the activities of enterprises occurring normally and to contribute to improving the efficiency of all activities. System of estimates is made in businesses mainly static estimates, which is set to a specific production capacity. The flexible estimation is built on a series of activities aimed at providing information on the costs, revenues and achievable profits. Estimation process can be carried out according to the different sequences: Estimation can be made from the top to the bottom or vice versa. 9 10 1.4.2.3. Determinng production costs Identify objects for gathering production costs: Identify objects for gathering production costs is the first step in the organization of production cost accounting. The essence of identifying the objects is finding out where the costs are incurred (workshops, production department, engineering phase ...) or objects incurring costs (products, orders, ...). The methods of determining the cost of production. Actual expense method: Under this method, production costs include all expenses incurred in relation to production, including the cost of direct materials, direct labor costs and overhead production costs. The direct costs are directly aggregated for each object incurring expenses, and overhead production costs are normally collected and then allocated to the object incurring costs under the appropriate criteria at the end of period. The method of gathering the actual costs associated with the estimated costs: Under this method, costs incurred during the period have been recorded and stated. However, the cost of production calculated for the volume of the finished product can be determined on the basis of actual cost or estimated cost, depending on the nature and aggregateability of each item of costs. Standard cost method: The standard cost is other name of the norms of costs. In business management, standards include standards in terms of quality and price. Standards is a baseline for comparison with actual incurred to determine the differences of costs, and then find causes and solutions resolving these defects in the stage of production that cost differences arised. On that basis, it helps administrators make timely business decisions; Determine costs according to tasks (according to orders): Method of determining the cost basing on works is often applied in businesses that produce products by orders, single product with high value and large size. This method records detailed information of each individual products or group of similar products. Under this method, the costs of production are divided into the following expense items: direct material costs, direct labour costs and overhead production costs. In particular, direct material costs and direct labour costs are aggregated according to the actual costs incurred and overhead costs are estimated and allocated according to the allocation criteria selected. Methods for determining costs under the production process: This method is applied into enterprises that manufacture products through continuous production processes. Products are made in large quantities, not able to account separately costs of each individual product. Costs are collected at each department, each production stage and then calculating the product cost according to production period. Finallly, at the end of accounting period it is necessary to calculate costs of work-in-progress products by different methods. The modern methods of determining costs The traditional method of determining costs has advantages of easy implementation, not requiring qualification of managers and direct doers. However, it also has disadvantages such as accuracy of expenses and product costs maily depending on method of allocation indirect costs, lack of scientific co-ordination between departments concerned to adjust operations as needed. Therefore, to overcome the limitations, enterprises in developed countries have ignored the traditional method of cost accounting and applied the modern methods such as: activity based costing – ABC or target cost. 1.4.2.4. The analysis information provided for cost management in enterprises The process of analyzing cost information uses common methods of business analysis as the comparative method, exclusion method to determine fluctuation level and causes of that fluctuation. Comparative method is used to determine the fluctuations of following criteria: actual costs comparing to estimated costs or norm costs; actual profits and estimated profits... At the same time, exclusion method is used to find causes and effects of each factor to the fluctuations. Since then, corporate managers use cost information for the process of decision making: analysis of cost differences, analysis of relationships of costs, productivity and profitability; analysis and evaluation results of operations of cost centers; cost information for managerial decision making. 1.4.2.5. Segment reporting in the business. The organizational structure of the business includes components associated with business task assigned. Assessing the department's responsibilities is often implemented through the segment reporting analysis after a period of activity or predicting economic targets for the next period. Segment reports are reports comparing revenues with the costs of parts to determine business performance and operational efficiency of the department in the organization. Segment reports have often changes when changing the organizational structure or changing products or services, business sector or changing demand of information for internal administration activities. 1.5. Experience applying cost management accounting model in developed countries In the developed countries of the world, cost management accounting science have become an indispensable tool for internal management of enterprises, especially large corporations in developed countries such as Japan, USA, France ... If every business has direct investment in the research activities of the cost management accounting so that businesses use in developing management solutions provide economic efficiency. That is the real lesson for Vietnamese enterprises to approach and use in accordance with specific conditions of each business and each industry. The author introduces the model of cost management accounting in countries which typically have a lot of researches and practical applications of cost management accounting. From that, the author draws lessons, builds orientation for cost management accounting model for specific businesses in Vietnam. Large –scale businesses in Vietnam have started to apply modern management method into production and business activities. However, cost management accounting has not really become a useful tool which provides information for managers. Learning experience from developed countries, our country should select appropriate content for Vietnamese enterprises to promote effectiveness of management of business operations. 11 12 CHAPTER 2: THE CURRENT SITUATION OF COST MANAGEMENT ACCOUNTING BUSINESS IN VIETNAMESE CEMENT MANUFACTURING 2.1. Conspecturs of cement production industry of Vietnam 2.1.1. History and development of the cement industry Cement production is one of the basically industrical production formed and developed earoliest in Vietnam. After the date of 30th April 1975 the cement industry takes over Ha Tien cement plant with capacity of 300,000 tonnes /year, produced by the making wet reverter furnace method that was built during America – Wei period and Hai Phong cement factory with some cement workshops of vertical kiln. Then the North area has two modern cement factories with large capacity Bim Son (Thanh Hoa) and Hoang Thach (Hai Duong) built and put into production in 1981 and 1983. Bim Son Cement Plant was invested by Soviet Union (former) with two wet process rotary kiln, the size of 5,0mx185m, capacity of 1.2 million tons of clinker per year; Hoang Thach Cement Factory was invested by F.L Smidth with a dry process rotary kiln, the size of 5,5mx89m, capacity of 1.1 million tons clinker per year. To the South, in the province of Kien Giang, Ha Tien cement plant with two wet method rotary kiln, the size of 3,3x100m of the Venot-Pic firm (France) was expanded in 1991 with a dry process rotary kiln, its size of 4,8x64m by Polysius firm (France) ... Milestones of the cement industry was confirmed by the number of enterprises producing cement stretching from north to south, up to 91 businesses in 2013. The development of the cement industry and cement businesses associates with the development of technology of cement production. All cement manufacturing enterprises nowsaday have large scale and using modern technology. 2.1.2. Overview of the operational characteristics and organization of management apparatus of cement manufacturing enterprises To study on the status and characteristics of cement production enterprises in Vietname, the author selects the sample of 71 firms out of 91 (78%). Contents of the surveys in the enterprises are knowledge of the general characteristics and the status of cost management accounting in corporate (Annex 2.2). Now, all cement manufacturing enterprises (100%) have large scale and using technology of rotary kiln dry method. Thus the author chooses businesses with two criteria of geographic area and ownership type to implement the survey. From the survey results the author collects and summarise by statistical and analysis methods to find out the characteristics of production, business operation and management apparatus, management accounting situation at the cement manufacturing businesses. In the tables for illustrating, the author selects real data of Bim Son Cement Joint Stock Company 2.1.2.1. Production features of cement manufacturing enterprises in Vietnam Cement manufacturing industry has complex production line, continuous processing. The cement businesses are large scale units. This specific industry is only organized to produce in locations with natural conditions associated with the supply of raw materials as limestone, clay, ore ... Therefore, cement production enterprises concentrate mainly in the provinces as Thanh Hoa, Ninh Binh, Hai Phong, Ha Tay, Tay Ninh ... Currently, all plants are operating by the dry method with rotary kiln technology. This is the modern production lines, advanced automation and less energy consumption, less labor-consuming operation of the production process. The manufacturing process requires businesses to control costs to each production step: Mash ingredients; Clinhker baked; Cement grinding ... The cost of raw materials, labor costs, fuel should be monitored separately to control the efficiency and cost of each production stage. 2.1.2.2. Features of management apparatus With large-scale production (number of employees in manufacturing enterprises currently operating cement production line imported from the former Soviet Union and France is about 1,000 laborers, with businesses operating new technology it is approximately 500 to 700 employees), complex production processes,one of the important factors determining the success of the unit is the organizational structure of the corporate management in accordance with business sector, scale of production and business organization, capabilities and capacities of staff. The survey data from 71 firms of Vietnamese cement manufacturing shows that 100% of cement production enterprises are online structural management model. 2.1.2.3. Characteristics of accounting apparatus model Survey results in 71 cement enterprises shows that the cement manufacturing businesses has an accounting system organized as shown in Table 2.1 below: Table 2.1: The organizational structure of accounting department of firms surveyed Model of accounting apparatus Centralized model Dispersion model Mixture model(both centralization and dispersion) Total Number of Ratio (%) businesses 67 94% 4 6% 71 100% The mainly used model is concentrated one, the entire accounting work is done centrally at the corporate accounting department. At the department, subordinate units do not have their own accounting department, they only have employees on duty of recording transactions, then transferring documents to the corporate accounting department to gather and form necessary reports. Accounting department is supported by accounting software and some application software, so effectiveness of recording transaction and of controlling business activities increased. This is a feature that allows the methods and techniques of management accounting able to promote the advantages of accounting software to use financial accounting information from analyzing, and processing for objectives of management accounting. 2.2. Situation of cost management accounting of the Vietnamese Cement manufacturing 2.2.1. Situation of organizational structure of cost management accounting 13 14 The survey data indicates that 100% of the cement manufacturing firms surveyed do not organize their own management accounting. In some businesses, cost accounting and product costing department does financial accounting works and provides costs and prices information for the chief accountant at the request. This department is responsible for providing information to the chief accountant and advising corporate directors as needed. However, in the current stage in order to face economic difficulties and market fluctuations directly affectinge production and business conditions of the cement manufacturing businesses such as shrink of market share, raw material prices, rising fuel prices and energy, raw materials for cement production are exhausted, ... the cement businesses have to organize production and business activity more efficiently 2.2.2. Current status of cost classification in the cement manufacturing enterprises: Cost classification is the basis for recognizing and controlling costs, using data to analyze cost information for decision-making process in the cement manufacturing businesses. According to survey data from 71 firms shows that the cost classification is being carried out by the following criteria in Table 2.3. All enterprises have classified costs by the function to assess the incurred costs at each stage of production and by the economic use of the production factors. To ensure the consistency between cost and finished product cost, and to simplize the work of product costing, cost calculation of the cement products, the cement manufacturing companies have classified costs according to economic use. Accordingly, the cost of production is divided into direct material cost, direct labor costs and overall production cost. However, the production costs classification in the cement manufacturing businesses just meets the information for the accounting of the production costs and products pricing in financial accounting, determining the business profit, and ending financial reporting. This classification has not supported directly to supplying information for cost management accounting. 2.2.3. Current status of norms building and cost estimation: 2.2.3.1. Current status of the norms building in the cement manufacturing businesses in Vietnam: Member companies of the Vietnam Cement Manufacturing Corporation have operated according to the general system of economic and technological norms supplied by their corporation. However, to meet the specific manufacture conditions in each unit, the businesses have built the different norms systems for their units, so that they have a basis for resources mobilization and incurred costs control during the period. During the operation and production, the surveyed enterprises are using the systems (such as the raw material cost norm, labor cost norm,..) as the basis for xuất vật tư. At the end of periods, the cost norm is the basis for accounting department to compare to actual costs, accordingly to make reasonable decisions to adjust the production. 2.2.3.2. Current status of cost budgeting in cement manufacturing enterprises in Vietnam: The survey results showed that the cement manufacturing enterprises in Vietnam have estimated costs for their whole fiscal year. Their types of costs budgets are shown below in table 2.7. At the beginning of the year, the companies build plans of the consumption and the production for every month of the year. Based on those plans, they make the sales budgets for the whole period. From the sales budgets and production plans, together with labor norms and material norms, the accounting will create the types of production costs budgets such as material cost budget, direct labor cost budget, manufacturing overhead cost budget. The cost of sales budget and company governance cost budget have not been made, that leads to the lack of information to compare the real status and the budgets at the beginning of the period. 2.2.4. Current status of manufacturing costs determination: Manufacturing costs in the cement companies are calculated according to the actual cost method (Costs incurred in the companies are classified by the function and economic nature of the manufacturing factors). Because the cement manufacturing process is complex and continual, the companies are monitored and aggregated manufacturing costs by stages of the manufacturing process. At the end of months, the accounting department aggregated the manufacturing costs to calculate the finished goods cost and create the accounting reports. All above costs are aggregated in the whole company and every stage in details. Table 2.8 shows the cost objects in each stage. Table 2.8: COST OBJECTS IN MANUFACTURING STAGES Cost objects Wordshop 1Powder raw material production stage 1. Materials workshop 2. Clinker production stage 2. Kiln workshop 3. Powder cement production stage 3. Cement workshop 4. Packaged cement production stage 4. Packing workshop (Source: Bim Son Cement Joint Stock Company) To illustrate the accounting process of production costs, author present the processes in the surveyed companies by interviews and collect specific data which is generallytypical for cement manufacturing companies in Vietnam. * Direct material costs accounting: Direct materials costs include costs of main raw materials, auxiliary materials, fuel supporting to the production in companies. The control of material costs incurred in the cement manufacturing enterprises has been conducted by different criteria, in order to provide information for their cost management. * Direct labor cost accounting: Direct labor cost includes salaries, allowances, overtime salary, and salary deductions to pay for the direct production workers in cement workshops. The fact is that the cement manufacturing companies mainly use the method of payment according to the volume of the finished products. End of month, they base on the volume and quality of the finished products (output in a month) to do payroll accounting for direct labor in each manufacturing workshop. Form of payment for the workers is by the products. Many companies are paying salary by the contractual wage contracting such as: Nghi Son Cement Company signed the contract for workers based on the production plan established at the beginning of the month. Direct labor costs in the cement manufacturing businesses depend on the technology level of manufacturing processes. Currently, new production lines which have been invested in the cement 15 16 manufacturing enterprises such as Cam Pha cement JSC, Hoang Thach Cement Company, ... with the most advanced technology are consuming labor cost of of a quarter of the cost 10 years ago with the old technology. * Accounting overhead cost Overhead cost is the cost which support to manufacturing management in the workshops, and the production units. Overhead costs include cost of workshops’ management staffs; costs of materials, tools and supplies used for production; depreciation expense; external service costs; Other cash costs, ... After aggregated in each workshop, overhead cost is aggregated for the whole company in order to be allocated to product pricing objects. Most of the companies allocate the overhead cost in proportion to the direct materials cost for each cost object and product pricing object. However, there are 10 companies using the proportion of direct labor costs to allocate their overhead cost incurred. The cement manufacturing companies aggregate costs to calculate the cost of finished products. The product pricing object in these companies is work-in-process product – clinker which is finished after furnaces stage and finished product – cement is made after 4 stages of the production. Costs of sales incurred in selling centers and in branches are aggregated by costs locations. Costs of sales were detailed by cost factors including: sales staff cost, cost of materials used for sales, depreciation cost, advertising cost, ... At maturity, costs of sales are aggregated for the entire enterprise and calculate the profit. Company governance cost incurs in the functional departments: Division of planning; Division of labor organization; Office supplies,... The costs are tracked in detail for each cost item. At the end of period, the governance cost is aggregated for the entire enterprise to calculate the business result. Interest rate expense in the cement enterprises of Vietnam is high because their loan capital is accounted for three-quarters of the total capital. This is a considerable cost in the businesses because of its huge impact on the business results of the unit. The manufacturing costs and other costs are currently being controlled by location and the cost factor. This is very important information for decision – making. 2.2.5. Current status of cost management accounting report: According to the survey at the cement companies on the financial reports system in general and management accounting reports in particular, the result shows that 100% of the companies are making periodically accounting and financial reports. Only 45/71 cement companies are making periodically management accounting reports, or upon request of the internal governance. Management accounting reports are made at the end of accounting period supporting to the management need. The accounting reports of costs are made at the end of period and collected by the chef accountant. When director needs the information of cost and price, he asks the chef of accounting. Currently, information supply is only set up at the end of the year. When the business result is identified, the accountants collect the information based on the demand of the director. 2.2.6 Real situation of the analysis of the cost information for internal cost management of company: * The analysis of the relationship between cost, volume, profit: According to the questionnaire survey to the cement companies about their analysis of the relationship between cost, volume, profit; 100% of them said they have done this work. However, when we conduct the survey by interviewing 10/71 companies (Tien Son cement joint stock company in Ha Tay, Bim Son cement joint stock company, FICO cement joint stock company in Tay Ninh, Tam Diep cement joint stock company,…), the result shows the reverse. The companies have conducted the analysis of the cost, the volume and the profit items separately but they have not put those items in a relationship. The reason is that the managers who have high responsibility at the companies didn’t know any tool of the analysis in management accounting. End of financial year, the accountants at the companies have compared following items: direct material cost, direct labor cost, overhead cost, cost of sales, cost of company governance, finished product cost, sales, and profit. The comparision shows the difference and variability between last year and this year data, the companies have found out the causes of this. Their analysis has just reflected history information by comparing one way relationship between those items: from volume to incurred costs and profit gained. *Variance analysis for short term decision – making: At the cement companies in Vietnam, long term decision – making is for high scale investment such as investment of new technology, update and replacement of equipment. These decisions are going with long term strategic plan and business orientation. Every year, the business decisions are made based on last year’s profit and the market changes, accordingly determine the production scale. Short term decision – making of the managers comes from the data provided by the chef accountant. The information related to the cost and cost of finished products is provided by the accountants who are working in costs in the companies. 2.3 Evaluation the current status of cost management accounting in cement manufacturing companies in Vietnam: 2.3.1 Cost information control system: With the scale and characteristics of the cement manufacturing companies in Vietnam, they organize by the online functional model. This allows the directors to control all activities in all levels, units, departments – the cost centers. Main production units are divided by stages which ensure the suitable control to the closed production line. This model is also fit to the creation of responsible centers. Each workshop creates manufacturing cost centers, each consumption center creates sales centers,… This is a basis for building cost management accounting model which should be suitable to the cement manufacturing in Vietnam. 2.3.2 Evaluation the cost management accounting in the cement manufacturing companies in Vietnam: The accounting system and cost management accounting system: The cement companies organize the accounting system by center model, there are accountants collecting invoices and documents at the workshops and branches and returning to the 17 18 central accounting department for aggregation. In 71 companies observed, there are 04 companies organizing the system by both center and distributed model. Cost management accounting in the companies generally are not systematic. The roles of information needed are all based on the work of chef accountant and other accountants of costs. Process of setting cost management accounting information: The premise to conduct the process of setting cost management accounting information needed for internal management demand, the companies have applied the cost classification methods to identify the manufacturing costs incurred: classification by functions and by costs factors. These are the 2 main methods support to the recording data of financial accounting, finished products costing. The costs reports are made based on this classification method in order to control costs by factors. The companies have not conducted the classification cost by model methods such as by cost control level of managers, supporting to the decision – making process. Setting up cost control standards, building costs norms, cost budget and other budgets: The companies have built costs norms based on the technology economic norms of the Vietnam cement manufacturing corporation and adjusted to fit their own conditions. This is the standard used to determine real costs incurred in production process. The budget system made by the companies at beginning of the year is an orientation for the business and production process of the whole year. This system is a static budget system. The companies estimate the production volume based on their last year’s business result and their future period’s condition. In competitive market currently, there is not any company applying flexible budget system to response to the market changes. Identifying and measuring cost, business result – Applying appropriately the cost measure methods and identifying cost objects; determining activities and department results: In the Vietnam cement companies, cost objects are main workshop with manufacturing process, the finished products are cement and work – in process products like Clinker. To record costs, the companies apply real costing method. The accountants at the workshops collect documents of costs incurred to aggregate the manufacturing costs and other costs. By this method, the directors only have the information of costs after the manufacturing process finishes. Therefore, the reports of costs only can be made at the end of accounting periods. The accounting reporting – Setting information provided by accounting reports: According to the information demand of management, particularly directors in the cement companies researched, the cost accountants make the costs reports, turn to the chef accountants to report to the directors. The reports are made by cost factors and by manufacturing stages, and by time of month. Although the workshops which are the cost centers are controlled by accountants, they still have not reported costs in every workshop. Thus, the cost management accounting reports have been conducted but they are still very simple with the information of real costs and not really supported for cost analyzing. Analyzing costs, business result and effectiveness – Analyzing by costs centers, analyzing information for decision – making: The decision – making process in the companies depends on the accounting reports provided by costs accountants. The reports form is very simple. The companies have not analyzed the information of the relationship between cost, volume, profit in order to give the best decisions for their businesses. The analysis of separated items did not allow the businesses to have an overall view about the relationship between cost, volume, profit; this leads to wrong decisions. Therefore, the information of decision – making is just raw, it has not been analyzed to show the variances and the effects. Those are some backwards in the control process which leads to not good solutions for costs rising currently. CHAPTER 3: ACCOUNTING ENTERPRISES CONSTRUCT MODEL OF COST MANAGEMENT FOR VIETNAMESE CEMENT MANUFACTURING 3.1. Long-term strategic development of the Vietnamese cement manufacturing enterprises According to the information center of the Ministry of Construction, by the end of 2013, there were 129 cement production lines have been invested and put into operation with a design capacity of 83.4 million tons. It is expected that by 2020, domestic cement production will be about 112 million tons, which is 19 million tons higher than the demand. In the cement manufacturing industry in the coming years, there will be the possibility of oversupply, so the Ministry of Construction had document to propose the People’s committees of provinces and central Cities not to register further cement projects during from now to 2020. The forecast of cement demand in our country in 2020 by experts was given vary, but the difference is not large. In general, the forecast of cement consumption in the future of our country according to the regions shown in Table 3.2. About investment: Investing in developing sustainable cement industry contributes to the development of economy and society, rational use of natural resources, protection of ecological environment, historical and cultural monuments, landscaping and maintenance security and defense. There are prioritizing investment in cement projects in the southern provinces; the expansion of investment projects; projects with large capacity, modern technology and low consumption of fuel and energy. The cement projects under the portfolio together with this decision are only allowed to build cement grinding that has a capacity corresponding to the productivity of clinker furnace; do not invest the individual and independent individual grinding mills. About technology: Using advanced technology with high degree of automation, saving up materials and energy in production, choosing the right device to ensure stable production, high-quality products and reasonable prices, to increase 19 20 competitiveness in terms of regional and international economic integration. Investing in synchronization of equipment systems which utilize exhaust heat in the cement plant to generate electricity. About capacity scale: Developing plants with large-scale capacity, new investment projects with a minimum capacity of 2,500 tons clinker/day. For projects in the remote and the projects of technological transformation from kiln cement production technology to cement rotary kiln can apply appropriate scale capacity. Encouraging to establish complex, large cement producers from the existing projects with the appropriate forms. About layout plan: Prioritizing investment in cement projects in the southern provinces, regions with favorable conditions for raw materials, industrial development and transportation infrastructure; limiting investment in cement projects in areas with difficult material, bad effect on the cultural heritage and tourism development. With goals set out by the cement production industry in Vietnam, the cement production enterprises need to use synchronous solutions: Solving technical problems associated with technology management issues resources. Building models of management cost accounting in accordance with the current conditions of the Cement Manufacturing enterprises to strengthen cost control is indispensable measures to help businesses overcome the current economic difficulties. 3.2. Building models of management cost accounting for Vietnamese cement production enterprises In condition of production and personnel of the present cement production manufactories, authors proposed to design a management cost accounting model associated with the orientation: Promote the available factors, the content of work is being done; complete and add factors needed to fit the needs of cost control in the business. The design process of model is based on the production management system and cost control models available in the business. From there, the author designed the management cost accounting system incorporated with the process of making cost information. 3.2.1. Organizing the management cost accounting system After studying of model of accounting system in general and management cost accounting system in particular, after surveying real need of scale and level of human resource accounting department, author found that the combination of management cost accounting model and financial accounting model in one accounting system helps to be able to inherit the job information and financial accounting provided. Accounting department personnel, apart from work of financial accounting can handle more work of management cost accounting in order to provide cost information for all levels of internal management. Management cost accounting managers should be considered as an additional function of the accounting department. With this model the cost control process is performed according to 3 levels of hierarchical responsibilities: For production cost: Production foremen are responsible for controlling expenses incurred within their respective workshops and report to the vice president in charge of production. General Directors receives information about the cost from the vice president. For selling expenses: Expenses incurred at the consumption centers and branches are under the control of the director of the centers and branches. Director at consuming centers or branches report cost information related to consumption to vice president in charge of business. General Directors now receives reports from vice president in charge of business. For management costs: Costs incurred in the management department under the control of managers and directly reported to the General Director. The manufacturing process of cost information is done at the position of work in the enterprise. * Chief Accountant: Is the head of the company's accounting system, responsible for the entire operations of the accounting department before the director and the law, general in charge of financial and management accounting operations. * Accounting expenses, costs (Record past and future information): * Accounting in the factories (Responsible for recording the historical information) The job of management cost accounting need to be formalized by the rules and regulations specifically written for each job position. The types of operations and documentations should be designed in the standard form. Time and technical performance needs to be unified and specified in writing. Transmission of information, responsibility for providing information for each specific position should be formalized. This will allow the accounting department can work proactively and effectively instead of information is only collected, processed and supplied when receiving requirement of managers. Also relying on that basis, they can evaluate the job performance of the department and clearly attribute responsibility for each job position. There should be a combination of financial accounting and management accounting in the same department but their functions should be clearly distinguished. With such combination above, accounting system is streamlined and efficient implementation of the tasks set. 3.2.2. Classifying costs in the cement manufacturing enterprises The costs are classified according to the activity level and divided into fixed costs and variable costs. This classification is the basis for determining the breakeven point, choosing the optimal business plan. This stage is the precondition for management cost accounting can analyze management accounting information in situations of fluctuating factors such as the increase in cost of producing electricity price, advertising costs ... by analysis techniques of CVP relationships to make 21 22 decisions about product price, to control and to adjust cost structure thereby offering reasonable solutions. The model of management and control costs according to cost centers needs additional classification of costs into control costs and uncontrollable costs. Classification of costs into cost control and uncontrolled costs associates responsibility of controlling costs for each cost center. Production costs incurred in the main workshops are categorized under the authority of the workshop manager. This is the basis for applying the approach of target cost and Kaizen methods – control to maximum cost reduction during the manufacturing operations implemented in the enterprises. Furthermore, in the particular circumstances the company can apply this cost classification to provide information for internal management decisions such as: sinking costs, opportunity costs ... to be able to make the most appropriate decision. 3.2.3. Calculating cost norms The cement manufacturing companies have done to build the norm system includes: Norms of direct material cost; direct labor cost; overhead cost. The process of setting limits on the cost bases on the technical norms of cement manufacturing enterprises in order to guarantee the reality and advancement. According to the author, to control costs according to cost centers needs to establish additional norms of selling expense and administration expense. The selling expense norm is a standard to evaluate the process of cost control at the branches, consumption centers. Administration expense norm should be established for each functional department. Cement manufacturing firms have enough cement cost norms as a basis for estimating costs for each department. 3.2.4. Preparing cost estimating system Estimating cost in the cement production enterprise is set up for each financial year. However, the period for calculating cost is monthly (production cost fluctuation in each month will not be compared, collected and timely adjusted). Thus, the construction of cost estimating system needs to be complied with the scientific and consistent process in cement manufacturing enterprises to ensure the effectiveness of management tools: Ensure consistency in period and throughout enterprise; ensure flexibility, initiative. Current estimates in Cement Company are static estimates and are made for each year, which has shown the inadequacies in management. According to the author, businesses need establish additional flexibility estimates that the cost basis is the norm of the amount of inputs in the condition of the variations in prices of inputs through the months of the year, which can be adjusted to suit changing and reflects the fact rather than specific plans at a time. Or in the case of receiving additional orders, change in production output, enterprises can adjust flexibly to estimate consistent with more volatile unusual market conditions today. 3.2.5. Determining the production cost. In the current period, the global economic crisis and the Vietnam market, "demand" of commodities is tight, the demand for cement in 2010 and 2011 decreased compared to the previous years. Many enterprises in Vietnam recognized effects of modern management tools, used to control the operation of their business. The author argues that the cement production enterprises in Vietnam with large scale production lines and modern technology are moving towards automation need to choose these modern, synchronous management tools to overcome the current difficulties. Through the study, author found that the specific conditions of production and business can now use a combination of target cost method and Kaizen method to achieve efficiency in cost management and reach expected business target. 3.2.6. Reporting on cost management accounting From the business model and cost management control process under cost centers, authors proposed system of management accounting reports of Cement Company to split into 2 groups: Departmental report is established at the cost center and company’s cost management report is made at the accounting department of the company. Reports at the cost center are to control and assess the costs incurred in the center and send to levels of management as prescribed. In the accounting department, cost and expense accountant establishes cost reporting enterprise-wide cost management report in order to analyze cost information and make business decisions. To develop a systematic, scientific report system of cost management accounting needs to synchronize cost information. At the same time, the provisions of the above content must be documented and implemented in a formal way to bring uniformity across the company. 3.2.7. Analysis of cost information for the internal management Operational processes and business processes in enterprises can not only use financial accounting information, information which reflects the past issues to make future-oriented decisions. When businesses use the method of cost classification according to the level of activity which divided into two parts as variable costs and fixed costs businesses can now apply technique of analyzing the relationship between the cost-productivity-profit to select the optimal business plan in terms of specific production enterprises. The synchronization of planning process and initial estimating system can now use CVP analysis method to determine the production output needed to achieve the expected returns, from which provides direction the coordination between the stages of the production process so that the complete plan of profit, revenue and cost harmoniously synchronized. Analyzing cost information for short-term decision making. In the current competitive environment, cement production enterprises solve their problems under the directions: Control in order to reduce production costs, administrative costs; apply scientific advances in modern technology production; seek importers to export products, reduce stocks and continue to promote domestic consumption. Cement industry seeks assistance from the Government on policy loans with low interest rate and the construction of cement concrete road. However, the solution from the business will be the most important outlet for each business to solve 23 24 their own problems. It is essential that the levels of management needs information for the short-term decision making. Analyzing and assessing the results of operations cost center. To control production costs throughout the enterprise, the author proposed to develop cost centers under management model in the form of online business functions. The cost centers are formed into 3 groups: Cost center of mass production function; Cost center of sale function; Cost center of administration function. Then develop indicator systems and assessment methods, set up reporting systems to assess cost centers. 3.2.8. To assess the efficiency and to analyze information to make decisions Among the important functions of corporate governance applied to develop production and business activities: Development Planning  Organizing to implement  Testing process  Assessing the implementation process, the assessment phase to decide adjustments of plan for the next period plays extremely important role. The assessment should ensure that there is the combination between the generality and the details, and the association with the assessment liability regime (reward and punishment) for individuals and related parts. 3.3. Conditions for implementing the cost management accounting model in Vietnamese cement production enterprises 3.3.1. For enterprises To help businesses to be aware of this system, there needs real change from the business. First, the need to change the mindset of managers on the application of modern management tools in the current period is a prerequisite. The change of perceptions of administrators to replace traditional ways is conducted through the effective communication channel. Second, in order to apply the model of cost management accounting, the increase in the professional qualifications of the accounting staff and relevant departments is also extremely important. The co-ordination of parts, functions in enterprises need to be scientific, effective. Third, the manufacturing process must be flexible to accommodate the overall objectives of the business is controlling costs to achieve profitability goals. Fourth, synchronization of management tools, automated connection between the parts of the business are conditions for implementing model of cost management accounting. Currently, many large enterprises in Vietnam used ERP tools used to synchronize the coordination of functions and departments within the company, ensuring the overall planning objectives. The cement production enterprises may apply ERP system, which is a positive factor for the application of cost management accounting. Fifth, there should be a review of the management and function of the departments in the enterprise. 3.3.2. For the State. It is important that state creates a good environment for businesses to have access to and aware, then apply into their business. First, the state should create open information environment for businesses to have access to and know that there is cost management accounting tool to provide useful information for all levels of internal management in business. Second, the Financial Accounting has been legislated to regulate the general standard way for businesses throughout the economy but for management accounting, there is only circular 53/2006 / TT-BTC defined very general basic accounting management, content of management accounting ... There is a need for issuing specific and open guidelines for business to refer and apply appropriately. Third, schools where teach accounting need to specialize and pay more attention in accounting management modules, consider on par with financial accounting so that, students when graduating can implement the management accounting techniques in the specific businesses. CONCLUSION Vietnam economy in current crisis period requires the companies to promote their internal strong in order to apply flexibly solutions against difficulties. Controlling production activities and business in the companies appropriately by the best decisions is one way to solve economic problems, in order to gain business effectiveness. In this economic situation, the cement companies are getting in very difficult status because of the direct effect of construction industry in our country. Controlling costs to get profit object is an effective tool which has been tested by experiences of management in Japan, France, and America. The author’s desire is to promote the roles of an economic management tools which is cost management accounting applied in the cement companies and solve their difficulties. Therefore, the author chose the research project which is to build cost management accounting model for the cement manufacturing companies. This project is used for research and applied to solve their difficulties by the cost management accounting tool. In the scope of this thesis, the author has solved following matters: To interpret opinions about the model in general, then show the opinion and nature of cost management accounting management model in particular. To present all gained result of the survey about the current status of cost management accounting conducted and applied by the cement manufacturing companies in Vietnam, then show the success, the backwards and their causes in the companies. To build cost management accounting model with its factors which are suitable to the characteristics of the cement companies in Vietnam. In the scope of this thesis, the author has tried to apply the knowledge and research experiences to complete. However, the gained results still has some restrictions which need to be enhanced. The author wants to get advice from professors and colleagues to be better.
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