The basis for ABC of job costing

In terms of necessity, the basis for ABC is reflected in the questioning of the scientific nature of traditional cost calculation methods and the assumptions about cost habits in the research and practice of traditional management accounting. The traditional cost calculation method is based on the assumption that there will be no significant changes in operations and business volume in the short term. It is assumed that the proportion of direct costs is relatively high, and cost habits are divided into variable costs and fixed costs. However, after the 1970s. Enterprises place more emphasis on long-term sustainable development. From a long-term operating perspective, most costs are variable; the company's business volume has increased sharply. It breaks through the original business volume assumption; the development of technology-intensive industries makes indirect costs account for the majority of many enterprises, subverting the original assumption that direct costs have a higher proportion. ABC is the cost calculation theory to solve these traditional information distortion problems.

From the perspective of possibility, the just-in-time production method (Just In Time, hereinafter referred to as JIT) creates conditions for the feasibility of ABC. In the JIT production system, under the conditions of production automation and financial computerization, enterprises can closely connect every link of raw materials entering the factory, products leaving the factory, and entering circulation. Operation activities that do not add value in the production process are reduced, thereby achieving the purpose of reducing product costs and improving labor productivity. Since the method of setting up job accounts starts from the lowest level job and goes up step by step, the operation is relatively complicated, so it requires more accurate and efficient cost calculation methods and a strict and scientific control and management system. The emergence of JIT makes the application of ABC possible.