The costs of these activities will then be allocated to the cost object according to the level of activities used by this object.
(2) ABC model using EAD matrix
In their study on the application of ABC method at Tools Inc., an industrial equipment manufacturing company, Valentina Gecevska and Zoran Anisic (2006) introduced the ABC model using EAD matrix.
The salient features of this model are: (i) Activities are grouped into groups of activities to ensure that the number of activities is not too large, then accountants use the cost-activity matrix (EAD matrix) to allocate resource costs to activities and use the activity-product matrix (APD matrix) to allocate activity costs to products; (ii) Allocating resource costs to activities or allocating costs of activities to products is carried out on the basis of proportional estimates. Therefore, the ABC model using the EAD matrix is considered a simple, effective and inexpensive ABC model to apply.
(3) TDABC model
Robert S. Kaplan, the father of ABC, introduced the Time-driven ABC (TDABC) model in his 2005 paper. This model is said to be simpler and less expensive to implement than the standard ABC model. The TDABC model simplifies the cost calculation process by eliminating the need to interview and survey employees. This new model allocates resource costs to cost objects directly using a more concise framework and requires only two estimates. First, the model calculates the cost of providing resource capacity, then uses capacity cost rates to allocate departmental resource costs to cost objects by estimating the resource capacity (typically time) required by each cost object. By clearly identifying the unit time used to perform each activity, the enterprise obtains information about the potential cost and performance of each activity as well as data on unused capacity in the total resources provided to perform the activity, thereby having appropriate measures to effectively manage the activity.
1.2.3. Comparison of activity-based costing and traditional costing
Alike
In terms of basic objectives , both methods are the same, which is to determine the cost price of the product, and provide cost price information for management levels to make decisions. Therefore, the final price calculation object of both methods is the cost of product production.
Regarding the method of collecting direct costs, both the TDC and ABC methods collect and calculate direct material costs and direct labor costs directly for the cost object.
Different
About the circumstances of its birth: The TDC method was born in the years 1870 - 1920, at that time science and technology were not yet developed, the production process was simple, direct NC costs accounted for a high proportion and indirect costs accounted for a low proportion. The TDC method chose the criterion for allocating indirect costs, usually the number of labor hours or the number of machine hours, and the allocation of indirect costs to products, even if there was a deviation, did not significantly affect the product price. Today, science and technology have developed very strongly, leading to a huge change in the production process. If in the past, production relied mainly on labor, today production mainly relies on machinery, equipment and technology. Therefore, direct NC costs gradually decreased and indirect costs accounted for an increasingly high proportion. In addition, natural resources were gradually depleted, business resources were limited and fierce competition was increasing both in the domestic market and the world market. In this context, managers need accurate, relevant, timely and detailed information for the decision-making process. The TDC method cannot meet these requirements and the costing system in the enterprise needs to change to meet the management information requirements. In 1988, Robin Cooper and Rober S. Kaplan introduced the ABC method to overcome the inherent disadvantages of the TDC method and meet the information needs of managers.
Regarding cost aggregation objects: For TDC, determining cost aggregation objects is usually based on factories and production processes, while ABC determines cost aggregation objects as activities that generate costs.
Regarding the scope of cost aggregation: TDC relies on the scope of cost generation to aggregate them, while ABC relies on the cause-and-effect relationship or cost-generating activities to aggregate costs by activity...
Regarding the scope of product cost calculation: The scope of cost calculation of the TDC method is usually the product manufacturing cost, while the scope of cost calculation of the ABC method can be the production cost or the total cost depending on the conditions and management requirements of each enterprise.
Regarding the general cost allocation criteria: The TDC method allocates production costs to pricing objects based on a single allocation criterion, while the ABC method selects the general cost allocation criteria based on the causal relationship between activities and cost generation, so the allocation criteria are more numerous than the TDC method.
Regarding the phase of general cost allocation: According to the TDC method, general costs are allocated to cost objects according to a 1-phase model, in which production costs are allocated to products based on a single allocation criterion selected. According to the ABC method, general costs are allocated according to a 2-phase model: in phase 1, general costs are allocated to activities, and in phase 2, the costs of activities are allocated to products.
Regarding the accuracy in calculating product cost: The TDC method uses a single criterion to allocate production costs, which causes unreasonableness and inaccuracy in the process of allocating production costs. The ABC method uses many criteria for allocating general costs. Moreover, the allocation criteria are selected based on the cause-and-effect relationship between activities and cost generation, so general costs are collected and allocated in more detail and more accurately, leading to more accurate information about product costs than the TDC method.
Regarding cost control: TDC method controls costs through cost centers, whereby costs are identified and controlled by each cost center based on the location and phenomenon of cost occurrence, and each cost item is controlled. Meanwhile, ABC controls costs through activity centers, whereby costs are collected and controlled by each activity and activity center.
Regarding the scope of application: TDC and ABC can be applied to all types of enterprises, to all production or service provision processes, from simple to complex.
However, in terms of efficiency and cost, the ABC method is more effective in organizations with the following characteristics: Indirect costs account for a large proportion; Products include many types; Product types require different technical requirements and service levels; Production processes are complex and there are frequent changes between product types.
Regarding complexity and implementation costs: The TDC method uses a single criterion when allocating production costs, so it is quite simple and the implementation cost is low. The ABC method collects and allocates production costs in more detail, uses more criteria for allocating common costs, so it is more complicated, even much more complicated than the TDC method, and the implementation cost is therefore also higher.
Table 1.1: Differences between TDC method and ABC method
STT
Target | TDC method | ABC method | |
1 | Birth circumstances | When science and production level were not yet developed, production costs accounted for a small proportion of total production costs, and the need for management was high. low cost | As science and production level develop, production costs account for an increasingly large proportion of total production costs, and the need for cost management is high. |
2 | Cost aggregation object | According to workshop, production process... depending on specific characteristics each enterprise | By activity or group of activities |
3 | Cost aggregation range | Based on cost occurrence phenomenon to collect costs | Based on cost-generating activities to aggregate costs for each activity |
4 | Product costing range | Production cost | Manufacturing cost or total cost |
5 | Cost allocation standards | Use a single allocation criterion | Using multiple cost allocation criteria, each activity or group of activities has its own allocation criterion based on the relationship |
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![Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015
zt2i3t4l5ee
zt2a3gsnon-credit services, joint stock commercial bank
zt2a3ge
zc2o3n4t5e6n7ts
At that time, the Branch had to set aside a provision for credit risks, which reduced the Branchs income.
Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015
Unit: Billion VND
140
120
100
80
60
40
20
0
63.3
80.34
89.29
110.08
131.99
2011 2012 2013 2014 2015
Profit before tax
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, through chart 2.2, it can be seen that BIDV Tien Giangs profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project Restructuring the system of credit institutions in the period 2011-2015 approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services.
2.2. Current status of non-credit service development at BIDV Tien Giang.
2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times.
Along with the development of the Head Office, BIDV Tien Giangs products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,...
2.2.1.1. Payment services:
In accordance with the Prime Ministers Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc.
Chart 2.3. Net income from payment services in the period 2011-2015
Unit: Million VND
6000
5000
4000
3000
2000
1000
0
3922 4065
4720 5084 5324
2011 2012 2013 2014 2015
Net income from payment services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment.
2.2.1.2. Treasury services:
BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giangs treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17].
Chart 2.4. Net income from treasury services in the period 2011-2015
Unit: Million VND
350
300
250
200
150
100
50
0
105 122
309 289 279
2011 2012 2013 2014 2015
Net income from treasury services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services.
2.2.1.3. Guarantee and trade finance services:
BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance.
Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015
Unit: Million VND
14000
12000
10000
8000
6000
4000
2000
0
5193 5695
2742 3420
8889
3992
11604 12206
5143 5312
2011 2012 2013 2014 2015
Net income from guarantee services Net income from Trade Finance
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.5, we can see that BIDV Tien Giangs income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giangs corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area.
are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future.
2.2.1.4. Card and POS services:
As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services.
In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system.
Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments.
Chart 2.6. Net income from card services in the period 2011-2015
Unit: Million VND
3500
3000
2500
2000
1500
1000
500
0
687
1023
1547
2267
3104
2011 2012 2013 2014 2015
Net income from card services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.6, it can be seen that BIDV Tien Giangs card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25].
Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area.
Unit: Machine
STT
Bank name
Number of ATMs
Cumulative number of ATM cards
POS machine
1
BIDV Tien Giang
23
97,095
22
2
BIDV My Tho
7
21,325
0
3
Agribank Tien Giang
29
115,743
77
4
Vietinbank Tien Giang
16
100,052
54
5
Dong A Tien Giang
26
97,536
11
6
Sacombank Tien Giang
24
88,513
27
7
Vietcombank Tien Giang
15
61,607
96
8
Vietinbank - Tay Tien Giang Branch
6
46,042
38
(Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21])
Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6).
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Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015
zt2i3t4l5ee
zt2a3gsnon-credit services, joint stock commercial bank
zt2a3ge
zc2o3n4t5e6n7ts
At that time, the Branch had to set aside a provision for credit risks, which reduced the Branch's income.
Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015
Unit: Billion VND
140
120
100
80
60
40
20
0
63.3
80.34
89.29
110.08
131.99
2011 2012 2013 2014 2015
Profit before tax
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, through chart 2.2, it can be seen that BIDV Tien Giang's profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project "Restructuring the system of credit institutions in the period 2011-2015" approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: "Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services".
2.2. Current status of non-credit service development at BIDV Tien Giang.
2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times.
Along with the development of the Head Office, BIDV Tien Giang's products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,...
2.2.1.1. Payment services:
In accordance with the Prime Minister's Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers' cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc.
Chart 2.3. Net income from payment services in the period 2011-2015
Unit: Million VND
6000
5000
4000
3000
2000
1000
0
3922 4065
4720 5084 5324
2011 2012 2013 2014 2015
Net income from payment services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment.
2.2.1.2. Treasury services:
BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giang's treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17].
Chart 2.4. Net income from treasury services in the period 2011-2015
Unit: Million VND
350
300
250
200
150
100
50
0
105 122
309 289 279
2011 2012 2013 2014 2015
Net income from treasury services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services.
2.2.1.3. Guarantee and trade finance services:
BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance.
Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015
Unit: Million VND
14000
12000
10000
8000
6000
4000
2000
0
5193 5695
2742 3420
8889
3992
11604 12206
5143 5312
2011 2012 2013 2014 2015
Net income from guarantee services Net income from Trade Finance
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.5, we can see that BIDV Tien Giang's income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giang's corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area.
are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future.
2.2.1.4. Card and POS services:
As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services.
In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system.
Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments.
Chart 2.6. Net income from card services in the period 2011-2015
Unit: Million VND
3500
3000
2500
2000
1500
1000
500
0
687
1023
1547
2267
3104
2011 2012 2013 2014 2015
Net income from card services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.6, it can be seen that BIDV Tien Giang's card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25].
Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area.
Unit: Machine
STT
Bank name
Number of ATMs
Cumulative number of ATM cards
POS machine
1
BIDV Tien Giang
23
97,095
22
2
BIDV My Tho
7
21,325
0
3
Agribank Tien Giang
29
115,743
77
4
Vietinbank Tien Giang
16
100,052
54
5
Dong A Tien Giang
26
97,536
11
6
Sacombank Tien Giang
24
88,513
27
7
Vietcombank Tien Giang
15
61,607
96
8
Vietinbank - Tay Tien Giang Branch
6
46,042
38
(Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21])
Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6).
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Some Key Solutions to Promote Positive Changes and Limit Negative Changes of Socialist Production Relations in -
Cultivation and Production Process of Special Rare Weasel Coffee
STT
Target | TDC method | ABC method | |
causal relationship with the occurrence of costs fee | |||
6 | Common cost allocation phase | 1 Phase | 2 Phases |
7 | Accuracy | Short | High |
8 | Cost Control | Control costs through cost centers | Control costs through activity centers |
9 | Scope of application | Applicable to all types of enterprises | More effective in organizations with the following characteristics: Indirect costs account for a large proportion; Products include many types; Products require different technical requirements and service levels; Production processes are complex and changeable. regularly between product types. |
10 | Complexity and cost of implementation | Simple, low cost implementation | Complex, high implementation costs |
Source: Author's synthesis
1.3. Experience in applying the activity-based costing method in some manufacturing enterprises in the world and lessons for Vietnamese manufacturing enterprises
1.3.1. Experience in applying the activity-based costing method at some manufacturing enterprises in the world
In this section, the author presents the current status of ABC application in 3 typical manufacturing enterprises in the world, these 3 enterprises apply 3 different ABC models. In which, Xu Ji Electric Co., Ltd. applies the standard ABC model, Tools Inc. Manufacturing Company applies the ABC model using the EAD matrix, and finally Kemps LLC Milk Production and Distribution Company applies the time-adjusted ABC method (TDABC).
(1) At Tools Inc.
Valentina Gecevska and Zoran Anisic (2006) studied the case of ABC method application in a typical small and medium-sized manufacturing company, Tools Company.
Inc. (abbreviated as Tools.Inc). Tools.Inc is a medium-sized manufacturing company that produces three product lines of production tools. Engineering work is the main activity at Tools.Inc because the production of products mainly uses automated machinery. The company has 10 main customers, accounting for 80% of revenue. The current number of employees of the company is nearly 100 people. Despite the growth in scale and sales, the company's profits have been declining for several years and it has suffered a loss for the first time in the last 2 years before applying the ABC method. The manager believes that the price based on emotions or the application of traditional costing methods is no longer suitable. Therefore, the company decided to apply the ABC method. Because the data needed to operate the ABC system is not available and the cost of collecting it would be very expensive, the manager decided to use the method of speculation, system evaluation and use of actual data.
Current status of ABC method application at Tools.Inc
Tools.Inc does not apply the standard ABC model but applies the ABC model using the cost-activity matrix (EAD Matrix) to create the smoothest transition from the traditional costing method to the ABC method.
About the price range
The company applies the ABC model using the EAD matrix to calculate the total cost. Accordingly, the product cost is made up of both production costs and non-production costs.
About the content of the ABC method
For direct costs
Direct costs are collected and priced by the Company in the same way as the traditional method, whereby direct production costs including direct material costs and direct labor costs are collected directly for pricing objects which are the Company's products.
For indirect costs
For indirect costs (overhead costs), the Company uses the Cost-Activity matrix to allocate to cost objects. The allocation method used by Tool.Inc is illustrated through the following example:
Step 1: The company determines the expense categories in the income statement and selects the allocation criteria in phase 1 (Appendix 8).
Step 2: Identify activities and allocation criteria in phase 2 (Appendix 9). Appendix 10 illustrates the Company's cost-activity-product hierarchy diagram.
Step 3: The company establishes a system tree related to the cost category, activities and products. The EAD matrix is used by Tools Inc to systematically show the role of activities in the cost category (Appendix 11). The “ ” sign at each intersection of the cost-activity matrix shows that activity i has incurred costs in item j.
Step 4: The cost of each cost category is allocated to activities. Each cost category is divided among activities based on the cost consumption rate of each activity (Appendix 12).
Step 5: Each intersection cell i,j of the EAD matrix is replaced by the amount calculated by multiplying the cost of portfolio j by the ratio i,j. The new matrix shows the cash consumption of each activity. The total cost for each activity is obtained by summing the rows. The new cost matrix for Tools Inc. with the cash consumption of each activity is shown in Exhibit 13.
Step 6: Activity costs are allocated to each product after the total cost of each activity has been determined. The procedure in this step is similar to that used to allocate costs in the first stage; however, the second stage cost allocation criteria allow Tools Inc. to determine or estimate the consumption of activities by products. In this step, the APD matrix is used. The APD matrix for Tools Inc. is shown in Appendix 14. As before, the “ ” in the intersection of cell i, j indicates that product i uses activity j.
Step 7: The “ ” sign is replaced by the corresponding ratio. The ratios are then entered into the APD matrix, as shown in Appendix 15.
Step 8: The company calculates the overhead costs for each product. The final APD matrix, illustrated in Exhibit 16, shows the total overhead costs allocated to each product for each product as well as the sources of these costs.
Comments on the application of ABC model using EAD matrix at Tools.Inc
The ABC model using the EAD matrix has helped Tools.Inc obtain more accurate and timely cost and price information than the traditional method. In addition, applying ABC according to this model helps the Company to see more clearly how common costs arise from activities. The cost-activity matrices also
can be used to identify positive innovation directions in the production and business processes of enterprises. The ABC model using the EAD matrix is considered very suitable for small and medium-sized enterprises such as Tool.Inc. because this method provides a relatively smooth transition from the traditional method to the ABC method without requiring a large investment in a complex data collection system, and it also does not require restructuring of the enterprise. Therefore, the above method can be used as an intermediate step for the complete implementation of the ABC system step by step when the estimated data is completely replaced by actual data.
(2) At Xu Ji Electric Co., Ltd.
Lama Yan Jun Liu and Fei Pan (2011) studied the application of ABC method at Xu Ji Electric Co., Ltd. (abbreviated as Xu Ji). Xu Ji was originally a state-owned enterprise, then transformed into a public company. The company is a large enterprise specializing in the production of electrical equipment in China, established in 1993, headquartered in China.
ABC application in practice at Xu Ji
The ABC model applied at Xu Ji is the standard ABC model. Initially, the ABC model was piloted in a major production department of the Company in December 2001. After obtaining positive results, the Company proceeded to widely apply it to its subsidiaries.
Xu Ji's main production department consists of Workshop 1 and Workshop 2. Workshop 1 produces high-productivity products such as high-voltage electrical equipment. Workshop 2 produces low-productivity products such as safety and automation systems. Before the research and application of ABC in late 2001, Xu Ji operated a traditional accounting system (Appendix 3), which involved a large amount of accounting work. The purpose of accounting at that time was mainly to serve the needs of financial reporting, and therefore the lack of accuracy in determining product costs was inevitable.
At this time, Xu Ji underwent a series of management model transformations due to competitive pressure in China's free market. Previously, Xu Ji was a state-owned enterprise, specializing in products based on state production quotas, with very little competitive pressure, but now the company is forced to face competitive pressure.