tóm tắt tiếng anh hoàn thiện kế toán chi phí với việc tăng cường quản trị chi phí trong các doanh nghiệp chế biến thức ăn chăn nuôi.

1

MINISTRY OF EDUCATION AND TRAINING
NATIONAL ECONOMICS UNIVERSITY



TRAN THI DU



Improvement of cost accounting and enhancement of
cost management in animal feed processing enterprises.


Major: Accounting (Accounting, auditing and analysis)
Code: 62.34.30.01



SUMMARY OF THE DOCTORAL THESIS IN BUSINESS AND
MANAGEMENT






HA NOI - 2012

2

The work is completed in:………………………………….
……………………………………………………………………


Scientific instructor:
1. AP.Dr. Nguyen Thi Dong
2. AP.Dr. Dinh Thi Mai



Judge 1:………………………………….
……………………………………………….
Judge 1:…………………………………
………………………………………………
Judge 1:…………………………………
………………………………………………


The thesis will be defended before the State-Level Thesis Marking
Council in ……………………………………………………………
………………………………………………………………………
At………on……….……………………



For details about the thesis, please refer in the library:………

3

PREFACE

I. Introduction
1. The reason for choosing the research topic
Accounting is considered as a tool of financial management because it
provides the information necessary for finance through accounting reports,
especially information of management accounting. Thus, in an enterprise,
accounting is always connected with the functions of managers including
planning, organization, direction and coordination, comparison of actual results
with the plan. Animal feed processing enterprises (AFPEs) of the animal feed
processing industry are operating in an environment with a lot of difficulties
related to the production and consumption of products; improvement of
accounting costs in AFPEs has become an urgent need for AFPEs to provide
information for the process of cost management and business management of
enterprises. Therefore, the author chose the topic "Improvement of cost
accounting and enhancement of cost management in AFPEs"
2. The purpose of research
With the research topic, the author will go into the systematization of
theories of cost accounting in production enterprises. Also, the author will
survey and assess the real situation of cost accounting in AFPEs in Vietnam.
Since then, the author will offer solutions and conditions to apply cost
accounting to AFPEs in Vietnam to enhance cost management in this type of
enterpries.
3. Research subjects
Firstly, the thesis studies theories of cost accounting in production
enterprises in order to make a general theoretical framework of cost accounting

that can be applied to production enterprises in general. Then, the thesis goes
into the survey on the implementation of cost accounting work in AFPEs in the
direction of analyzing enterprises’ size to assess the organization of the cost


4

accounting work on the basis of AFPEs’ sizes.
4. The scope of research
The scope of research contents
The author chooses the topic "Improvement of cost accounting and
enhancement of cost management in AFPEs". Cost accounting to enhance
corporate governance includes financial accounting and management
accounting. However, for the purpose of enhancing cost management, the topic
goes into studying of cost management accounting to provide information for
enhancing cost management in AFPEs. For financial accounting, the author only
studies at the combination level to collect information of historical costs.
The scope of research subjects
The author selects the research scope of AFPEs in the northern region
because they are characterized by heavy concentration in the Red River Delta
area and the northern area has a full of enterprises in all models for research.
II. Overview of research
There are many research topics on application of management accounting in
enterprises, in which there are some research topics on the issue of cost
management accounting in enterprises such as the thesis "Organization of
production cost management accounting in animal feed production
enerprises" (2006) (Pham Quang Man - National Economics University). The
topic goes into the study of business and production cost accounting in three
typical enterpries for three major types of business ownership including the
Central Animal Feed Joint Stock Company, Peter Hand Hanoi Joint Venture

Company and Kien Cuong Production and Trading Co., Ltd. However, the topic
only offers assessment on the real situation of cost accounting in these three
enterprises without the investigation and assessment on a large scale to draw
objective conclusions of real situation of cost accounting for AFPEs in general
and AFPEs according to each scale. In addition, there are some essays, thesiss
studying this issue such as the thesis "Direction of building management
accounting reporting system and organizing application to enterprises of
Vietnam" (2002) (Pham Quang - National Economics University), the thesis


5

"Building of cost management accounting model in pharmaceutical
enterprises of Vietnam" (2007) (Pham Thi Thuy - National Economics
University), the thesis "Management accounting and analysis of production
costs in the production sector in Vietnam" (2002) (Le Duc Toan- Academy of
Finance.) Some theses also studied on accounting management as the thesis
"Direction of building contents and organizing the application of
management accounting to enterprises of Vietnam" by the author Pham Van
Duoc (2007) (Ho Chi Minh City University of Economics), the author Tran
Van Dung with the thesis: "Organization of management and cost price
accounting in production enterprises in Vietnam" (2002 –Academy of
Finance), the author Giang Thi Xuyen (2002) with the topic "Organization of
management accounting and business analysis in state-owned enterprises",
the author Pham Thi Kim Van (2002) with the topic "Organization of cost
management accounting and business performance in tourism trading
enterprises", the author Nelson U. Alino with the topic “The Effect of
Management Accounting Systems on Reducing Conflict and Improving
Decision-Making in Heterogeneous Groups” (University of Nigeria, 1990), the
author Robin A. Sanford with the topic “The impact of activity-based costing on

organization performance (Nova Southeastern University, 2009), etc. However,
the above mentioned theses and researches have had non-comprehensive scope
of research and not resolved the research problem that the author is interested
yet. That was improvement of cost accounting to enhance cost management in
enterprises in animal feed processing industry; therefore, the author chose the
topic "Improvement of cost accounting and enhancement of cost management
in AFPEs" as research topic of the thesis.
III. Research methodology:
The author delivered investigation sheets to 52 AFPEs and interviewed four
AFPEs that were Rural Technology Development Joint Stock Company, CP
Vietnam Corporation - Xuan Mai Branch, Hoang Linh Breeding Technology
Development Joint Stock Company, Vimark Company Ltd. The author used
SPSS software to collect and classify data in order to demonstrate assessments
and summaries of the thesis.


6

IV. The layout of thesis:
In addition to the preamble and conclusion, the thesis includes three major
chapters:
Chapter 1: Basic theory of cost accounting and cost management
enhancement in production enterprises
Chapter 2: Real situation of cost accounting and cost management
enhancement in AFPEs
Chapter 3: Improvement of cost accounting and enhancement of cost
management in AFPEs


7

Chapter 1:
BASIC THEORY OF COST ACCOUNTING AND COST
MANAGEMENT ENHANCEMENT IN PRODUCTION ENTERPRISES
1.1. Concepts of cost, cost management and cost accounting
information and enhancement of cost management in production
enterprises
1.1.1. Concept of cost
According to the conception of political economy, cost is the monetary
valuation of wastes of human labor and materialized labor that enterprises invest
in production and business organization for a certain period of time. According
to the concept of cost from the accountant's perspective, in financial accounting,
"cost includes production and business costs arising in the business operation of
enterprise and other costs." For management accounting, costs are very various.
It can be actual costs incurred such as costs in financial accounting; in addition,
there are estimated costs that are non-incurred costs, opportunity costs are the
costs that are not in the accounting books or could be estimated or expected
costs of an activity. Thus, there are a lot of concepts of cost, especially in
management accounting. This indicates that there is no single definition for the
cost because of two reasons: Firstly, the costs incurred and used for some
specific purposes; secondly, the way to use cost will determine how to calculate
the cost and record, analyze, process costs. For management accounting,
depending on the purpose of using cost information, the cost will be collected,
calculated and analyzed in different ways or under different classifications to
exploit relevant cost information for decision-making in a most efficient way.
1.1.2. Cost management, cost accounting information and enhancement
of cost management in production enterprises
Corporate governance is a continuous, organized and targeted process of
impact of enterprise owner on employees in it, using the best of the potential and
opportunity to implement its business and production activities to achieve the set

8

forth goals in accordance with the laws and social practices. Performing
corporate governance is the process of implementing major functions of
corporate management and decision-making surrounding four major functions:
planning, plan implementation, performance measurement, and comparison of
actual results with the plan. Cost management includes a system of methods
developed for planning and control of activities leading the arising of
enterprises’ costs. Cost accounting plays an important role in providing useful
information for cost managers, serving them in gathering their competence on
the strengths, looking for opportunities, identifying resources with the lowest
cost and improving the products’ and services’ quality.
1.2. Cost accounting to serve cost management in production
enterprises
1.2.1. Classification of costs in business and production enterprises to
serve cost management
Contents of cost are very diversified and rich and can be categorized
according to many different criteria. The thesis states seven ways of cost
classification: Cost classification according to operation functions, cost
classification based on cost factors, cost classification based on cost behavior,
cost classification based on the relationship between cost and object of cost
accumulation, cost classification based on the relationship between costs and
financial statement, cost classification based on the level of control of managers.
Cost classification serves analysis and comparison in order to make decisions on
selecting the optimal business project.
1.2.2. Building of cost norms and cost estimates in production
enterprises
Cost norms are the combination of the spent costs per product unit

through trial production or testing. Estimation is a plan on using resources in a
period, expressed as detailed expectations of the mobilization and use of
production factors, financial resources to ensure that the activities of the


9

enterprise takes place normally, contributing to improve the effectiveness of all
activities.
* Building of cost norms: Norm of direct material costs, norm of direct
labor costs, norm of production overhead costs, norm of sales cost, and norm of
corporate governance cost.
* Cost estimates.
Cost estimates are divided into static estimates and flexible estimates:
Static estimates: are estimates built on a level of operation in order to
provide information of cost, revenue and profit of enterprise that can be
achieved under the selected business project. The thesis presented direct
material cost estimates, direct labor cost estimates, production overhead cost
estimates, sales cost estimates and corporate governance cost estimates.
Flexible estimates: are estimates built on a series of operational levels to
provide information of cost, revenue and profit of enterprises that can be
achieved under the business projects and possibilities.
1.2.3. Determination of costs for cost objects
1.2.3.1. Collection of cost information
Collection of accounting information is often expressed through such stages
as: collection of initial information about costs through a system of documents,
collection, classification and systematization of cost information on accounts
and accounting books, collection of information through a system of accounting
reports.
1.2.3.2. Cost determination methods for cost objects

* Traditional cost determination methods for cost objects
- Full cost determination method. According to this method, production
costs are all costs related to production, including direct material costs, direct
labor costs, production overhead costs.
- Direct cost determination method. According to this method, only
variable costs of production are counted in production costs. A part of
production overhead costs and the remaining fixed production overhead cost are


10

considered as a kind of periodical cost, which is excluded in product costs.
In the traditional methods of cost determination, if basing on the source of
cost data, costs can be determined according to the actual cost method, normal
cost method or standard cost method. If basing on the characteristics of the
product and technology process to create products, one of the following two
methods of cost calculation can be selected: work-based cost determination and
production-process-based cost determination.
* Modern methods of cost determination for cost object
- Activity-based cost- ABC is a method to determine costs by identifying
cost centers or activity centers in an organization and assigning costs to products
and services based on the number of events or transactions related to the process
of providing a product or service. According to this method, overheads are
allocated through two stages below:
1. Stage 1: Determination of activity-based costs
2. Stage 2: Allocation of activity-based costs to products, customers
Putting ABC model into use under the theory initially faces a lot of
difficulties and is costly; therefore, up to November 2003, the author Robert S.
Kaplan and Steven R. Anderson introduced the concept of activity-based cost
determination on the basis of time allocation (Time-driven ABC), in this

manner, it is necessary to identify two parameters:
Firstly, how many costs are needed for a time unit of the department with
incurred costs.
Secondly, how many time units are needed to implement the activity.
In addition, ABC method uses activity level – based cost allocation. As a
result, in the process of ABC system development, three allocation criteria are
formed:
+ Operating frequency based cost allocation
+ Time - based cost allocation
+ Work level - based cost allocation


11

- Target cost is the aggregation of methods and administrative tools
permitting to achieve objectives of cost and operation in the stage of
designing and planning new products. This method also allows providing the
basis of control at the production stage and guaranteeing these products to
achieve profit targets that have been identified in line with the life cycle of
product.
1.2.4. Cost analysis and decision-making on cost management
- Analysis of cost fluctuation through historical information analysis.
Analysis of cost fluctuation through historical information analysis includes cost
fluctuation analysis based on cost norms and cost estimates, analysis and
assessment of performance of responsible centers, cost fluctuation analysis
through cost price reports and business performance reports.
- Analysis of appropriate information for decision –making and future
forecast. Analysis of future information includes analysis of the relationship of
Cost-Volume-Profit, analysis of breakeven point and use of appropriate
information for decision – making.

1.3. Cost accounting apparatus models
Management accounting and financial accounting models are under
combined model, separate model and hybrid model.
1.4. Experience on cost accounting of several countries in the world
and lessons for Vietnam
- Experience on using cost accounting of the U.K. and the U.S.
- Experience on using cost accounting of the European countries
- Experience on using cost accounting of the Asian countries
- Lessons learned about cost accounting for Vietnam
From experienced lessons about management accounting of countries, Vietnam
can learn to build a cost accounting system for its enterprises.
In short, cost accounting is a part of the accounting system to provide
information for managers to perform functions of corporate governance. In the


12

chapter 1, the author presents the relationship between cost accounting and cost
management, from which the role of cost accounting in providing information
for managers to make decisions in performing functions of corporate
governance will be found. Since then, the thesis systematizes theories of cost
accounting associated with the purpose of enhancing cost management in
production enterprises from the traditional and modern point of view. The thesis
focuses on basic contents of cost accounting including: cost classification
methods, methods of building the system of cost norms and cost estimates,
methods of cost determination, processing and analysis of cost information to
serve decision-making. Cost accounting theory will be the basis for the
construction of a cost accounting system in order to enhance cost management
in production enterprises. The thesis also studies cost accounting apparatus
models and experience on cost accounting of some countries in the world and

draws lessons for the organization of cost accounting model in Vietnam.
Through the Chapter 1, the thesis systematizes theories of cost accounting to
enhance cost management in production enterprises, as a basis to assess the
situation and offer solutions to perfect cost accounting to increase cost
management in AFPEs.



13

Chapter 2:
REAL SITUATION OF COST ACCOUNTING AND COST
MANAGEMENT ENHANCEMENT IN AFPES


2.1. Overview of AFPEs
- System of AFPEs
Animal feed processing industry in Viet Nam is a fledgling industry that is
advent and developed in line with the breeding sector in Vietnam. Since 90’s
period of reform, animal feed processing industry of Vietnam achieved rapid
development steps. According to Animal Feed Association, until September,
2006, there were 249 companies; in 2010, there were 315 AFPEs; in August
2011, there were 486 AFPEs all over the country. Number of factories have
increasingly grown along with the development of the industry and have been
distributed in the North, the Central and the South. Along with the increase in
number, growth rate of animal feed processing industry has also increased over
the years.
Table 2.1: Animal feed production industry in Vietnam in the period of 2000 -
2008

Year
Compound
feeds
Concentrated
feeds
Total
(Thousand
tons)
Total
(Equivalent
conversion)
(thousand
tons)
Growth
rate
(%)
2000
1,700 330 2,030 2,690
2001
1,950 350 2,300 3,000 11.5
2002
2,400 340 2,740 3,420 14.0
2003
2,650 400 3,050 3,850 12.6
2004
2,700 400 3,100 3,900 1.3
2005
3,238 702 3,940 5,344 37.0
2006

4,361 747 5,118 6,600 23.5


14

2007
5,300 825 6,125 7,776 17.8
2008
6,882 684 7,567 8,935 14.9
Average (%) 16.6
Source: Breeding Development Strategy to 2020
(Department of Livestock Production 2007)


- Product characteristics and production organization in AFPEs
affecting cost accounting.
Animal feed production technology is characterized
by mass production. Animal feed production process is a continuous and closed
one.

Diagram 2.1:
Process of animal feed processing
-
Management system in AFPEs.
In investigated AFPEs, there were 22
joint stock companies accounting for 42.3%, 29 limited companies accounting
for 55.8% and only one private enterprise, accounting for 1.9%.
-
Characteristics of financial mechanism in AFPEs
. Managers take
initiative in determining long-term targets such as investment in expanding or
Compound
feeds

Put
materials

Grinding

Tank
Mixi
ng
table
Concentrat
ed

-

Steam
chamber
to ripen
Palletizin
g

Freezing

Screening
Weighing,
packing


Weighing,
packing
Put
materials


15

narrowing production and in short-term decisions such as regulations on cost
norms, cost estimates, decisions on the use of resources and in decision on sales
pricing.
- Characteristics of accounting apparatus organization and
accounting policies applied in AFPEs.
All animal feed production activities
are concentrated at the factory, so accounting apparatus organization is selected

in the concentrated form.
- Cost management in AFPEs.
AFPEs are organized in the form of
online functionality. Cost information system is mainly provided for the board
of directors by accounting department.
2.2. Real situation of cost accounting serving cost management in
AFPEs
2.2.1. Real situation of cost classification


-
As regards cost-purpose-and-use-based cost classification
:
All AFPEs
implement cost classification based on purpose and cost use.
-
As regards cost-behavior-based cost classification
: AFPEs have
initially classified costs based on cost behavior and some enterprises have used
methods to separate mixed costs into fixed costs and variable costs. Small and
medium-sized enterprises had higher rate of splitting production overhead costs,
sales cost and corporate governance costs into fixed costs and variable costs than
small-sized ones.
2.2.2. Real situation of building of cost norms and cost estimate
-
Real situation of building of cost norms:
AFPEs have attached special
importance to building of cost norms; however, the rate of building of cost
norms in medium and large sized enterprises is higher than other small ones.
-

Real situation of cost estimate
: Companies have paid attention to
making sales estimates. The remaining estimates had a low rate of estimation.
2.2.3. Real situation of cost determination for cost object
- Real situation of collection of cost information:
System of accounting
documents, system of cost accounting accounts and system of accounting books
have met the needs of financial accounting; however, as for management


16

accounting, real situation of information collection made no contribution to the
collection of cost information as requested.
- Real situation of cost determination for cost object in AFPEs
+ Real situation of production cost determination in AFPEs:
In
AFPEs, production costs are detailed for each type of product or generally
gathered for the whole workshop. Cost object is finished product in the last stage
of production technology process; object of cost pricing is each type of product.
+ Transfer of production costs and assessment of products in
progress:
In AFPEs, the entire cost of production will be transferred to
Accounts 154 or 631 to calculate cost price.
+ Calculation of cost price of finished products:
Through the survey,
100% of surveyed AFPEs selected cost object that was each type of product,
46/52 enterprises (88.5%) used simple method, 5/52 enterprises (9.6%) used the
ratio method, and only one enterprise (1.9%) selected coefficient method.
According to the survey results, two among 52 surveyed enterprises

calculated cost price according to variable cost method, of which there were one
medium-sized enterprise and one large-sized enterprise. All the surveyed AFPEs
did not apply ABC method.
- Real situation of cost sales accounting and corporate governance
cost in AFPEs.
Sales cost and corporate governance cost are generally gathered
into Accounts 641, 642 and at the end of the period they are transferred to
Account 911.
2.2.4. Real situation of cost analysis and decision – making on cost
management
- Real situation of cost fluctuation analysis through historical
information analysis
+ Analysis of cost fluctuation based on cost norms and cost estimates:
According to the survey results, most of enterprises made comparison and
analysis of cost and cost price. 50/52 enterprises (96.2%) compared actual costs
with costs of the previous period or estimated costs and 51/52 enterprises
(98.1%) made a comparison of actual cost price with cost price of the previous


17

period, normative cost price or planed cost price.
+ Analysis and assessment of performance of responsible centers,
departments.

As for determination of indicator of gross profit of each product:
According to the survey results, 41/52 surveyed enterprises (accounting for
78.8%) determined gross profit indicator for each type of product.
As for allocation of sales cost and corporate governance cost in order
to determine profit at departments:

The number of surveyed enterprises
allocated sales cost and corporate governance cost for each type of product,
market, branch according to the following correlative ratio: 16/52 enterprises
(accounting for 30.8%), 8/52 enterprises (making up 15.4%), 4/52 enterprises
(accounting for 7.7%). The criterion that enterprises selected were the allocation
based on output, revenue or prime cost
+ Analysis of cost fluctuation through reports on costs
36/52 enterprises (69.2%) determined the rate of return on investment
capital (ROI), 10/52 enterprises (19.2%) determined Residual Income (RI) and
17/52 enterprises (32.7%) identified the rate of net return on assets.
+ Analysis of cost fluctuation through the reports on costs, cost price
and business performance:
The number of AFPEs implementing cost
fluctuation analysis through the reports on costs, cost price and business
performance were few.
- Real situation of relevant information analysis for decision-making
and future forecast
Output analysis
: According to the survey results, up to 50/52 enterprises
(accounting for 96.2%) conducted the comparison and analysis of actual
production output with planed output or design-capacity-based output.
Determination of breakeven point
: According to the survey results,
AFPEs initially performed determination of breakeven point.
2.2.5. Real situation of cost accounting apparatus model:
Management
accounting department in AFPEs was organized commonly with financial
accounting apparatus, i.e. mixed cost accounting apparatus models.

18

2.3. Assessment of cost accounting situation in AFPEs
2.3.1. Assessment of real situation of cost classification
- Cost-purpose-and-use-based cost classification:
AFPEs classified
costs based on cost purpose and use; however, refection scope of some types of
costs was broken.
- Activity-level-based cost classification:
Rate of enterprises classifying
costs based on activity level is low.
2.3.2. Assessment of building of cost norms and cost estimate
- As for building of cost norms
: The rate of AFPEs building cost norms
is relatively high. Medium-sized and large-sized enterprises had higher rate of
building cost norms than small sized ones.
-
As for cost estimate
: AFPEs was initially interested in estimates,
especially sales estimates; large-sized enterprises had higher rate of estimation
than small and medium-sized ones. Thus, building of cost norms and cost
estimate in AFPEs were not carried out completely and synchronously.
2.3.3. Evaluation of cost determination for cost objects
- Evaluation of real situation of cost information collection
For documents:
Accounting documents have not been added indicators
to serve for collecting information about management accounting in order to
meet the needs for providing information for cost accounting to enhance cost
management in the enterprises.
For usage accounts:

As for financial accounting, most of AFPEs
complied with the provisions on accounting accounts of financial accounting.
However, accounting accounts did not serve management accounting.
- Evaluation of real situation of cost determination in AFPEs


For object of cost accumulation and cost object
: AFPEs selected object
of production cost accumulation that was each product or each workshop and
cost object being each type of product. However, they did not calculate cost for
each product batch or determine the cost for each customer or branch to assess
the profitability and performance of each customer or branch.
For methods of cost determination:
All surveyed AFPEs identified cost


19

of products according to the actual cost method and determined the cost of
products according to the full cost methods. The number of AFPEs applying
normal cost method and direct cost method was few and no enterprise applied
ABC method.
- For overhead cost allocation
: Overhead costs in AFPEs were arising
costs related to many cost objects and most of the AFPEs selected output as
allocation criteria; the remaining companies used criterion of direct material
costs.
2.3.4. Evaluation of processing and analysis of relevant cost
information for decision – making
- Evaluation of cost fluctuation analysis through historical information

analysis
Analysis of cost fluctuation based on cost norms and cost estimates:

Almost enterprises compared the actual output, actual costs, and actual cost
prices with the set forth plan or estimates, etc, in order to assess the
implementation, to detect difference in order to have appropriate corrective
measures for the next period.
Analysis, assessment of performance of responsible centers, departments:

AFPEs only evaluated business performance of the whole enterprise through
indicators of ROI, RI and ROA that are used to assess the results of general
business operation of the entire enterprise. Due to non-organization of
responsibility accounting, AFPEs did not evaluate the performance of cost
centers.
Analysis of cost fluctuation through the reports on cost price and
performance
: AFPEs only reported cost price according to the full cost method to
perform analysis of cost price fluctuation according to each factor of direct material
costs, direct labor costs and production overhead costs. Reporting system of
management accounting has not been built completely and systematically yet.
- Assessment of appropriate information analysis for decision – making
and future forecast
For analysis of cost-profit-volume (CPV).
The rate of enterprises


20

determining breakeven point of sales is low, suggesting that many enterprises
did not really attach much importance to determine these indicators as a basis

for the implementation process.

For analysis of appropriate cost information for decision-making on
corporate governance in the special cases:
Many AFPEs did not pay attention
to the processing and analysis of cost information serving cost management and
decision-making.
2.3.5. Assessment of real situation of cost accounting model
AFPEs implemented combined cost accounting model, so costs were
saved, apparatus was compact but works of management accounting were not
professionalized and information was not timely provided.
In summary,
the need for providing cost accounting information for
managers in AFPEs is very huge in the context of highly increasing price of raw
materials, increasing production costs and consumption of products facing a lot of
difficulties. The thesis used scientific methods to review real situation of cost
accounting and cost management enhancement in AFPEs. The thesis provided the
advantages, limitations and reasons of cost accounting situation in AFPEs in terms
of cost classification, norm establishment and cost estimate, cost determination for
cost object and analysis of relevant cost information serving decision-making. It
also reviewed the current situation of cost accounting model in AFPEs. Since then,
it offered conclusions on the real situation of cost accounting and enhancement of
cost management in AFPEs that had many limitations, did not fully provide cost
information systems necessary for cost management in AFPEs. Therefore, it is
necessary to improve cost accounting to enhance cost management in AFPEs.
Assessments and conclusions on the real situation of cost accounting in AFPEs will
be the basis for the thesis to provide specific recommendations to improve cost
accounting in AFPEs in the chapter 3, helping to improve effectiveness of cost
management, bringing higher profit to AFPEs.

21

Chapter 3:
IMPROVEMENT OF COST ACCOUNTING AND ENHANCEMENT
OF COST MANAGEMENT IN AFPES

3.1. Development strategy of animal feed processing industry in
Vietnam
According to Decision No. 10/2008/QD-TTg on approving "Livestock
Development Strategy to 2020", the goal by 2020 is basically livestock
production moves to production mode of farm, industrial, meeting majority of
need for ensured quality food for domestic consumption and export. The
strategy also provides development orientation to 2020 of animal feed
processing industry that is strong development on the basic of scale expansion,
technological innovation, and improvement of product quality and lowering of
product’s cost price. Output of industrial animal feed: average increase of 7.8% /
year, reaching about 19 million tons. Therefore, the animal feed processing
industry has received the attention of the State; however, it is necessary to
develop specific proposals on sustainable animal feed development,
corresponding to its position in the economy.
3.2. Orientation of improvement of cost accounting and enhancement
of cost management in AFPEs
Improvement of cost accounting and enhancement of cost management in
AFPEs must ensure that: firstly, the improvement must be consistent with the
characteristics of production and business activities in AFPEs; secondly, the
improvement must meet the need for information served for enhancing cost
management in AFPEs; thirdly, the improvement must meet objectives
including savings and efficiency

3.3. Solutions of improvement of cost accounting in AFPEs
3.3.1. Improvement of cost classification
The author provided solutions to improve cost classification in AFPEs


22

including cost classification based on purpose and use, cost classification based
on cost behavior and cost classification based on the relationship between the
cost and object of cost accumulation.
3.3.2. Improvement of building of cost norms and cost estimate
3.3.2.1. Building of cost norms
The thesis built norm of direct material costs, norm of direct labor costs,
norm of production overhead costs and norm of sales cost, norm of corporate
governance cost that were appropriate with actual characteristics of AFPEs.
3.3.2.2. Cost estimate
The thesis established production cost estimates of AFPEs in reality
including estimates of direct material costs, estimates of direct labor costs and
estimates of production overhead cost and these estimates were made according
to two directions of static estimates and flexible estimates.
3.3.3. Identification of cost price for cost object
3.3.3.1. Collection of cost information
The thesis recommended solutions of improvement in the stage of
information collection including perfection of the system of accounting
documents and accounts to ensure collection of detailed information to perfect
the system of cost accounting in AFPEs.
3.3.3.2. Solutions of determination of cost price for cost object
The author recommended that AFPEs should apply method of variable-
cost-based cost calculation, work-based cost determination in combination of
allocation of estimated production overhead costs under normal cost method to

calculate cost price of product batch.
The author recommended the application of ABC method to AFPEs to
calculate cost price for cost object as follows:
- For the determination of cost price of each product batch: the author
recommended application of ABC method with appropriate adjustment to
AFPEs in the scope of workshop aimed at calculating cost price of product


23

batch.
- For cost price of each product and each customer and each branch: the
author based on solutions of improvement of cost classification based on the
relationship between the cost and object of cost accumulation to calculate cost
price for each product, each customer and each branch.
* Reporting system to serve cost management in AFPEs.
The author
recommended two reporting systems, including:

-
Reporting system of costs
: Including report on implementation of norms
of direct material costs, direct labor costs and report on production overhead
costs, sales cost and corporate governance cost based on cost factor.
-
Reporting system of business performance:
Including reporting system
of business performance based on each product, each customer and each branch.
3.3.4. Improvement of processing and analysis of cost information to
serve cost management

The thesis recommended that AFPEs should build a system of indicators of
cost analysis: analysis of cost-volume-profit, analysis of cost fluctuation based
on the cost norms and cost estimates, analysis and assessment of business
performance in responsible centers, analysis of cost fluctuation through reports
on costs, cost information for decision-making in business management and
organization of responsibility accounting.
3.3.5. Selection of cost accounting model in AFPEs.
According to the author, large-scale enterprises can perform separate
management accounting model. Small and medium-sized AFPEs should use
hybrid model.
3.4. Conditions to implement solutions of improvement of cost
accounting in AFPEs
To implement the recommended solutions, the author gave conditions to
implement on the side of the State, the Vietnam Association of Animal Feeds,
the Vietnam Association of Accountants and Auditors (VAA) and AFPEs.


24

CONCLUSION

AFPEs operate in the socialist-oriented market economy with the
management of the state. These enterprises are proactive in the mobilization and
use of business and production capital. To achieve high business performance,
managers of enterprises in general and AFPEs in particular should be timely
provided with appropriate information for decision-making process, in which
information provided by cost accounting plays an importance role in information
system serving corporate governance. To see the importance of costs in the
process of corporate governance, the thesis analyzed the relationship between
cost accounting information and cost management in production enterprises.

Since then, the thesis systematized theories of cost accounting in production
enterprises to increase cost management, study experience on cost accounting of
some countries in the world and draw lessons learned for Vietnam.
Through research, data collection on the real situation of cost accounting
in AFPEs, the thesis made the review on the real situation of cost accounting to
increase cost management in AFPEs in terms of cost classification, building of
norms and estimates, cost determination for cost object, analysis of cost
information for decision-making and evaluation of cost accounting model
currently applied by AFPEs in the provision of cost information for cost
management.
On the basis of studying cost accounting theory and real situation of cost
accounting in AFPEs, the author offered solutions to increase cost management,
namely the author offered recommendations on cost classification based on cost
behavior and cost classification based on the relationship between costs and
object of cost accumulation to control costs more effectively and to act as a
basic to implement solutions of establishment of cost norm and estimate. The
author also made recommendations on the determination of cost price based on
variable costs with the application of estimated production overhead cost and


25

especially ABC method in determining the cost price of product batch, cost
price of product, cost price of customer, cost price of branch. The thesis also
built an administrative reporting system serving cost management, building of
system of cost analysis indicators and selection of appropriate cost accounting
model with the characteristics of business and production organization and
matching with the scale of AFPEs. Also, the author provided basic conditions to
carry out solutions to improve cost accounting in AFPEs. That is a combination
of the State, Vietnam Animal Feed Association, the Vietnam Association of

Accountants and Auditors and AFPEs.
However, from awareness of the need of management accounting in
business and production activities to bringing of management accounting to
become a useful, smoothly operated and regularly updated system is a difficult
job. It needs a team of qualified and experienced accounting staffs and a
combination of the departments in the company, the participation and support of
all its managerial levels, especially senior executives. At that time, management
accounting can become a powerful tool to serve decision-making and economic
and financial management of the unit.



26

LIST OF WORKS BY THE AUTHOR

1.
Tran Thi Du
(2011), “Method of activity-based cost determination:
Theoretical progress of management accounting”
Accounting-Auditing
Magazine,
Edition dated August 2011
2.
Tran Thi Du
(2011), “Methods of mixed cost analysis: From theory to
application in the reality by animal feed processing enterprises” ,
Accounting-Auditing Magazine
, Edition dated December 2011
3.

Tran Thi Du
(2012), “Building production cost norms in animal feed
processing enterprises”,
Accounting-Auditing Magazine
, Edition dated
June 2012
4.
Tran Thi Du
(2012), “Activity-based cost determination in animal feed
processing enterprises”,
Accounting Finance Research Magazine
,
Edition dated October 2012