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Modern Business Environment

Essay by   •  November 17, 2013  •  Essay  •  497 Words (2 Pages)  •  946 Views

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In this modern business environment, product diversity increases a lot, different products may consume activities and resources in quite a different way. For example the complex product are required more quality control, as a simple product needs much less. The first time the concept of ABC appears is in the article [Cooper and Kaplan, 1988]. The analysis of cost and profitability of individual products, services and customers represents a critical issue that companies were concerned with and where ABC tries to help them. Therefore, the activity based techniques can recognize the complexity and difference of products and provides more accurate cost information.

The Kerry Logistics is one of the third party logistic company and the head offices set up in Hong Kong. The Kerry Properties Limited is their investment holding organization, listing on Hong Kong Exchanges (Stock code: 0683). The Kerry Logistics is a leading logistics service provider in Asia with a solid presence in the China region and the Association of Southeast Asian Nations country, and a global network stretching across six continents. They provide sufficient assets, people and IT infrastructure to support the customer for purchasing, manufacturing in China and Asia to sourcing in the region and the worldwide.

The business encompasses Integrated Logistics, International Freight Forwarding (air freight, ocean freight, road freight), International and domestic Express by door-to-door services and Supply Chain Solutions For example Industry Solutions, Food & FMCG Trading and ISO Tank Solutions. They will extends from handling merchandise and non-merchandise.

In last decade, development of the third-party companies has been very important. Conventional costing approaches might generate the distorted information. This can result in making wrong decisions. When the company depend on this potential danger, the use of activity based techniques increases within third-party logistic companies.

In literature there are several definitions of the ABC. One of the definitions of ABC philosophy [Hicks, 1922] mentioned that:

"Activity-based costing is a cost accounting concept based on the premise that products (and/or services) require an organization to perform activities and that those activities require an organization to incur costs. In activity-based costing, systems are designed so that any costs that cannot be attributed directly to a product, flow into the activities that make them necessary. The cost of each activity then flows to the product(s) that make the activity necessary based on their respective consumption of that activity."

The basic principal of the cost calculation and control method is the activity based costing. The activity cost of the Kerry Logistic can be based on the cost drivers to separate the overhead cost more accuracy.

Though the recognition and measurement of the operating

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