Current Status of Business Cost Management in Vietnamese Wood Processing Enterprises

In the medium and small scale, the number of accounting staff is small (some enterprises only have 3 employees, accounting for about 50% of surveyed enterprises) and they are responsible for all accounting tasks and other tasks of the enterprise such as statistics, warehouse keeping, sales, etc. The accounting department of the enterprise performs the entire volume of accounting work from the initial stage to the stage of preparing accounting reports and will encounter some shortcomings such as: Due to having to take on too many tasks, the quality of work is not high and may violate accounting principles (such as: the chief accountant also writes payment vouchers, the cashier also writes receipt vouchers and does payroll work, the warehouse keeper also does purchasing work); The accounting team at the enterprises only performs the cost calculation operations in financial accounting and has almost never approached the business cost management model. In addition, they are almost incapable of using modern tools to process information.

With the above shortcomings, when implementing CPKD management at the factory, there will be difficulties because there are no specialized staff who have a deep understanding of the theory and methods of implementing the CPKD calculation model.

2.3. Current status of business cost management in Vietnamese wood processing enterprises

As stated in chapter 1, cost management is the calculation of cost of sales and analysis of financial and non-financial information necessary for managing a business, so when analyzing the current situation of cost management in Vietnamese SMEs, it is necessary to analyze both contents. That is: the current situation of cost calculation and the current situation of cost analysis in Vietnamese SMEs.

2.3.1. Current status of business cost calculation in Vietnamese wood processing enterprises

2.3.1.1. Cost classification

Although it has appeared for a long time in developed countries in the world (around the 20s of the 20th century), CPKD is still too new in our country's enterprises. There are many different reasons to explain this, but there are 2 reasons that we can easily see: our country's business administration science is still heavily traditional; management in our country's enterprises is a convenient management style.

For these reasons, in our country people are only familiar with one category of costs; there is no need to distinguish between expenditure, business expenses and financial expenses and whenever we talk about costs in enterprises, we generally call them production costs.

Through practical surveys and inheriting research results, it is shown that production costs in state-owned enterprises are very diverse, including many types, many things and different contents and uses. To facilitate the calculation of costs, state-owned enterprises have classified production costs according to operational functions; that is, production costs include items: direct production costs, indirect production costs, production costs and non-production costs including: enterprise management costs and sales costs. In addition, to use production cost information in inspection and decision making, enterprises also classify production costs according to the nature of production costs into direct costs and indirect costs.

2.3.1.2. Collection and cost calculation

When information is needed to make business decisions, determine and evaluate pricing policies or check operational efficiency, managers only need information on product costs. Product costs are determined based on actual expenses during the period to carry out the product manufacturing process. For that reason, in Vietnamese enterprises in general and in the BCCs in particular, accountants only calculate production costs without calculating business costs. Determining the object of CPSX aggregation is important. Determining the correct object of CPSX aggregation accounting in accordance with the characteristics of the production situation, the characteristics of the product manufacturing technology process and meeting the requirements of CPSX management of each enterprise helps to best organize the work of CPSX aggregation accounting. In BCCs, determining the object of CPSX aggregation is the first step performed in organizing the accounting of the production process. Through interviews with 47 directors of forest product processing enterprises of different sectors, it was shown that the product structure has gradually shifted towards refined products (most enterprises produce according to orders), so the object of collecting CPSX is each order, the object of calculating product cost is the product of each order [9, p.37]. To facilitate bookkeeping and detailed monitoring, wood products are coded (including letters and numbers) according to the characteristics of each enterprise, for example at Truong Thanh Group, 0TTI-CH086A is the symbol of the chair

Baby, in which: Specification (MM): 435W x 650D x 765H; Material: VN Poplar/Rubber (with cushion); Finishing: PU-Cherry/Light brown (Assembled-folded) (see details in figure 1, appendix 11); Tan Phu Wood Processing Company Limited codes all dining chair products with the letter TPC, after the letter is a number for each separate product type, for example TPC-42 is associated with product name chair 42; TPC-46 is associated with product name chair 46, etc. (see details in figure 2, appendix 11). Calculating CPSX by order can be carried out according to the item "Product Group" (Product Group = Order). If we indicate the order number in the "Product Group" field in the documents recording the types of production costs, the production costs will be divided into orders in order numbers. If we indicate the order number in the "Product Group" field in the documents recording the export of finished products and semi-finished products, the exported batch will also be divided into order numbers.

To get an overview of the current situation of calculating CPSX in Vietnamese SMEs, a survey was sent to 60 SMEs in some provinces and cities such as Hanoi, Quang Ninh, Ninh Binh, Nam Dinh, Binh Dinh, Binh Duong (with 28 enterprises responding) combined with the inheritance of previous research results. From these survey results, it can be shown that the most commonly used CPSX calculation method in SMEs is shown in diagram 2.5 below.

TOTAL PRODUCTION COSTS

Types of branches

fee

ORDER

Common costs

direct

Proportion

COST CENTER

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Figure 2.5 Main methods of calculating production costs in SMEs

Source: Author's survey results synthesis and inheritance of research results

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The starting point of the above diagram is the total production cost of the enterprise and is divided into two types based on the method of calculating production cost for the objects: direct production cost and indirect production cost. The direct production cost group is allocated directly to orders/products. The indirect production cost group is allocated directly to cost centers and then allocated to orders/products at the same rate (direct production cost of the order or total direct production cost). This allocation method contains three important weaknesses: One is that it does not reflect the activities necessary for the production of products; Two is that in the production cost, there are costs such as salaries for indirect labor, insurance, depreciation, maintenance, etc. that are allocated equally to each product. The result is distortion of production cost because each volume of products produced has different output and complexity; Third, deviations in product costs can lead to incorrect decisions such as product pricing, product output, and ineffective allocation of production resources.

Direct production costs in enterprises include direct production costs and indirect production costs. Through a survey of 60 enterprises representing localities nationwide and inheriting research results, direct production costs account for a large proportion in the product cost structure (about 50 - 60%) of enterprises. Therefore, full and accurate accounting of direct production costs is a condition to ensure accurate product costing, a measure to save production costs and reduce product costs. Direct production costs directly related to any order are directly accounted for that order according to the original documents (actual value). To account for direct production costs, accountants use account 621 and documents such as: Warehouse delivery note; Table of raw material consumption norms (used to notify the direct tax authority as a basis for determining non-deductible expenses when determining income tax according to Circular No. 130/2009/TT-BTC. This is also the basis for enterprises to determine the planned raw material consumption level, thereby determining the actual raw material consumption demand); List of raw material warehouses, etc. Accounting for raw material consumption in enterprises is carried out quite systematically with detailed accounting for each type (group) of manufactured products. The types of raw materials are coded into categories for convenience in accounting. Through the survey

Supervise, collect and calculate CPNVLTT according to the regular declaration method at the enterprises.

Cost of labor at state-owned enterprises includes wages and salary deductions payable to direct production workers at workshops. Cost of labor accounting at state-owned enterprises is often carried out in detail for each type (group) of products, however, enterprises have different bases for accounting, for example, unit price of salary/hourly wage or unit price of salary/product. Some enterprises do not directly monitor cost of labor for each type (group) of products but collect it on the whole workshop scale.

Production overheads are expenses not directly related to products, arising within the scope of workshops and production departments of the enterprise but having a general service nature for the production process of products (except for labor costs, material costs). Production overheads arising at state-owned enterprises often include the following factors: workshop staff costs, material costs, tool and equipment costs, fixed asset depreciation costs, loan interest costs, outside service costs, and other cash costs. Through a survey of 60 enterprises representing localities nationwide and inheriting research results, this expense item often accounts for 20% to 30% of total production overheads at state-owned enterprises.

Case study

In this section, the author chooses a specific enterprise as the research object. The enterprise chosen for the research is only a typical representative example. The enterprise chosen by the author is the Export Packaging Production Enterprise, established in 1996, a unit under the Packaging and Export Goods Production Joint Stock Company at Km9, Ngoc Hoi Street, Hoang Liet, Hoang Mai, Hanoi. This is a small manufacturing enterprise, producing 5 main types of products; namely: plywood crates, open crates, closed crates, pallets and sawn timber. All of these products are manufactured according to orders (according to specifications) requested by customers. The enterprise has 70 regular customers; of which: ABB Company Limited at Km9, National Highway 1A, Hoang Liet, Hoang Mai, Hanoi is the largest customer, accounting for nearly 50% of revenue. 10 other customers bring in 30% of revenue and the remaining 59 customers account for more than 20% of revenue. Before conducting this study,

The enterprise has not analyzed the relationship between cost - volume - profit, has not calculated the benefits of the product/each order as well as the benefits of the customer. The only information used for analysis is based on sales revenue. The administrator has thoroughly checked this information but they do not know which type of product/order or which customer is profitable. The only system providing management information is the financial accounting system. In the enterprise, accounting only calculates the financial costs but has not calculated the business costs to provide internal information. And also to facilitate the calculation of product costs, the enterprise has classified costs according to operating functions. These types of costs are recorded only in the general ledger. This makes the enterprise's accounting system overly simplified and therefore does not have enough information for management purposes. The main purpose of the study is to implement ABC/M in analyzing the benefits for customers and products of the enterprise. The reason the author chose a small-scale enterprise is because out of nearly 3,000 SMEs, 97.4% are small and medium-sized enterprises.

Calculate direct manufacturing costs

Calculate direct material cost

The factory's raw materials include many types, specifically: Main raw materials are types of wood used for production such as plywood, sawn timber, Lao pine, hardwoods...; Secondary raw materials: nails, paint, iron straps, sandpaper,... The order of collecting and calculating the raw materials at the factory is as follows:

Purchased materials must be checked by the warehouse keeper, then the accountant enters the warehouse according to the actual number of materials checked. The warehouse price is the invoice price (excluding VAT). Based on production needs, the staff will base on the consumption rate of materials to create a material receipt. The content of the receipt clearly states: name, brand, product specifications, goods, quantity, reason for use.

After the Board of Directors approves, the accountant writes a warehouse delivery note. The warehouse keeper delivers materials to the production team according to the delivery note. From the delivery note and receipt note, the accountant enters the material detail book for each type of material. The price of the delivered material is the purchase price of the material and is calculated according to the first-in, first-out and last-in, last-out methods.

For example, take the data of a material delivery note of the Factory in June 2010 as follows: On June 5, 2010, there is a plan to produce for ABB Company Limited 20 thin boxes (abbreviated: HT) 2270×2470×2030 made according to Australian requirements (coded as ABB order) and 05 HT 2690×1920×2080 for Yamaha Motor Vietnam Company made according to Japanese requirements (coded as Yamaha order); based on the material receipt paper, the accountant writes a material delivery note (as in Appendix 12). From the material delivery note, the accountant enters the material detail book. The detail book is created according to the form (as in Appendix 13). The reason for delivery written on the delivery note helps the accountant to collect materials for each user if the delivery is specific. If exporting to a group of products using the same type of materials (products put into the group are mainly open boxes, closed boxes, plywood boxes), it must be allocated to each product according to the following formula:

Material cost

allocate to

Number of products available

in box type A

Standard

Materials/1 unit

Total CP

each type of box

=×

Total standard quantity of raw materials

of the boxes

Materials to be allocated

(2.1)

Source: Author's actual survey at XN

In the above allocation formula, the standard of raw materials/1 SPA unit is determined through the drawing or design attached to the order. From the requirements of the drawing or design, the number of main and auxiliary raw materials directly needed to build a SPA can be calculated; thus, the volume of raw materials needed for a SPA unit can be calculated. Appendix 14 and Appendix 15 illustrate the work of calculating the standard of main and auxiliary raw materials for a 2270×2470×2030 system and a 2690×1920×2080 system. To serve the work of calculating the cost of CPNVLTT products of each order, it is collected through table 2.1.

The company applies the regular declaration method, at the end of the period, the value of raw materials is transferred to the Debit side of Account 154 and to facilitate the calculation of cost, the accountant opens a card to calculate the cost for each product/each order; on the accounting card, the costs are collected according to each item of Account 621, Account 622, Account 627 (illustrated in Table 2.2).

Table 2.1 Detailed list of CPNVLTT for each order in June 2010

Expense item	Unit of measure	ABB Order			Yamaha Order
Expense item	Unit of measure	Number quantity	Unit price	Total amount	Number quantity	Unit price	City
1	NVLC (wood)	m3	17,395	2,573,000	44,757,340	4,30565	2,450,000	10,548.84
2	Secondary VL				9,340,380			2,479.15
	8 plated nails 7-plated nail 12-plated nail M12 bolt Corner bracket Screw 40 Lid cover	Kg Kg Kg Each Each Each Female	172.2 60.48 240 1,920	29,500 26,000 4,800 800	5,079,900 1,572,480 1,152,000 1,536,000	38,965 16,065 30 40 480 20	29,500 26,000 4,200 4,800 800 10,500	1,149.46 417.69 126.00 192.00 384.00 210.00
Total					54,097,720			13,028.00

Source: CPNVLTT data at the factory

Thus, through monitoring the detailed book of main materials, auxiliary materials, and the table of raw material costs for each type of product, we have the raw material costs for production in June 2010 at the factory as follows: Main material costs are 396,143,783 VND; auxiliary material costs are 20,082,000 VND. Total cost of using raw materials is: 416,225,783 VND.

Table 2.2 CPNVLTT table for each product type (June 2010)

No.

Product Name	Unit	Quantity	Product Group	Debt 621
				1521	1522
1 2 3 4	HT 2270×2470×2030 HT 2690×1920×2080 Insert bar Pallet 1300×1100×120	What What What Female	20 5 704 300	ABB Order Yamaha Order TVTL Order Coca Cola Order	44,757,340 10,548,843 11,728,640 29,166,800	9,340,380 2,479,158 1,903,500
Total					96,201,623	13,723,038

Source: Extracted from raw material cost book for each product at the factory

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