Research on Coal Enterprises Activity-Based Costing Accounting Model Based
on ERP
Yan-hui Hou 1, Min Hao1, Wei Wang2, Hong-tao Yue3, Yong-jun Ding4
1
Department of Economic and Management, ShanDong University of Science and Technology, Qingdao, China
2
The principal's office, ShanDong University of Science and Technology, Qingdao, China
3
Mechanical and electrical team, Xinglongzhuang Coal Mine, Jining, China
4
Electrical and Mechanical Division, Wanfu Coal Mine, Heze, China
(Coolhyh@126.com, candyca4145@sina.com, W1969@sdust.edu.cn, hongtaoyue@sina.com, dyjjdd@126.com)
Abstract - ERP (Enterprise Resource Planning) and
ABC (Activity-Based Costing) have the different
management fields, but they still have the basis for
integration, such as the same costing objects, ideas for cost
management and management purposes. In this study,
based on the system integration thinking and basic concepts
of ERP and ABC, the theoretical and practical integration
model and framework (based on J2EE platform and web
service) of them was constructed. Furthermore, the ABC
accounting model of coal enterprises was discussed. This
study worked out a new feasible method for ABC
accounting in coal enterprises.
predetermined range and controls it more effectively.
III. INTEGRATION BETWEEN ABC AND ERP
A. The Integration Framework from Perspective of New
Coal Enterprise ERP
1)
Theory Integration between ABC and ERP
For coal enterprises, ABC and ERP can be integrated
in the following aspects: (1) Analyzing every activity in
activity chain using the method of ABC to identify value
added and no value added activities, restructuring and
optimizing the business process of supply chain[1]. (2)
According to resource driver and cost driver, calculating
activity costs with the method of ABC is more scientific
and reasonable. So it provides the foundation for the
quotas in EPR and the BOM’s making. The model was
showed in Figure 1.
Keywords - activity-based costing management, ERP,
integration, accounting model, web service
I.
INTRODUCTION
II.
Although there are different standpoints and
functions between ERP and ABC, it is feasible to
integrate the ideas of activity based costing management
into the use of ERP systems, using ERP’s advantages of
strong computing power and detailed data. Thus, we can
collect, calculate and analyze the activities which
consume the resource in supply chain from the design
stage, in order to distinguish the value-added and non
value-added activities, and take measures to minimize
non value-added (or value-added is not strong) activities
to optimize resource allocation. Meanwhile, we can
implement different activity management in the field of
cost accounting, which brings the cost within a
2)
Implementation Integration between ABC and ERP
We can integrate ABC and ERP, with integrating the
concept of ABC into ERP, to build an activity-based ERP
system, which can deepen the level of enterprise
management to operational level. In the traditional ERP,
main production schedule which guides the entire process
of production and operation management drives the
capacity requirement planning and material requirements
planning [2]. The traditional functional departments and
the basic production units are in the layer of planning and
ABC system
ERP system
Resource
Consumption
Activity-based
Activities
Main production schedule
cost accounting
and analysis
Value-added activities and
non value-added activities
Material requirement planning
BPR
Supply
Production
Sale
Foundations
Cost objects
Standards (quotas, BOM, etc.)
Fig. 1. Theory integration model between ABC and ERP
production management. Yet, in activity-based ERP, it
starts from the main activity-based production planning,
which on one hand drives the capacity requirement
planning and material requirements planning, and on the
other hand guides the activities of production and
operation in activity chain management. And the
B. The Integration Framework from Perspective of
Existing Coal Enterprise ERP Based on J2EE Platform
and Web Service
On J2EE Platform, implementation framework of
EAI based on web services (shown in Figure 3) includes
Production schedule, cost target, profit target
Activity
Optimization
Optimization
Main activity production schedule (coal mining, tunneling)
planning
layer
Material requirement planning, capacity requirement planning, aided
activity production schedule
Activity
Optimi
implement
-zation
layer
Purchase
Operation
Activity1
Activity2
Sale
Activity3
Logistics
···
Activity4
Activity N
Supply
chain
Activity
chain
Optimization
Optimization
Activity
Activity-based cost accounting
management
Activity control
Activity analysis
layer
Activity evaluation
Fig. 2. Implementation integration model between ABC and ERP
activities are in the layer of planning and production
management [3][4][5]. As to the coal enterprises, the
material consumption doesn’t constitute the product as an
entity. So there are some kinds of specialties in the
relationship between production schedule and material
requirement, between activity and activity division. The
activity-based ERP model is shown in Figure 2 [6][7][8].
three parts those are client, middle layer and background
system [9]. Client allows customers to find and call web
services in different ways (web browser or enterprise
application programs), so as to achieve the client's
connection. The middle layer is responsible for
developing, deploying and publishing web services, and
connects client with background system. It also can be
divided into presentation layer, business layer and the
Enterprise Application Program
Client
MT
WEB Browser
UDDI Server
HTTP/XML
HTTP/SSL
Presentation Layer
Web
Container
JSP
Servlets
EJB
Container
Middle
Layer
JAX-RPC
JAXP/JAXB
SOAP
Request
Business Layer
JAXR
EJB session Bean
JAXM
Integration Layer
J2EE AS
JCA
EJB Entity Bean
Proprietary/Protocol
JDBC
Background System
ERP
ABC
Enterprise Database
Fig. 3.
Implementation framework of ERP and ABC based on J2EE platform and web service
integration layer [10][11]. Presentation layer is comprised of
the web components (JSP, Servlets etc.) and responsible
for handling request / response of HTTP, XML and other,
session management and calling of the business layer
components, etc. Business layer uses EJB Session Bean
to achieve the logic functions of company's core business,
meanwhile transforms the related business logic into web
services, and published it to the UDDI server; integration
layer is responsible for disposing communication and
connections between business logic and background
systems, such as using EJB Entity Bean to access
ERP financial
Uncontrollable
subsystem
cost
Calculating
Activity pool
Can be
directly
allocated
Material costs
Wage costs Electricity
value of various resources, such as: human resource,
material resource, financial resource, information
resource, technology resource, etc.
The resource consumption is divided into the
controllable cost and the uncontrollable costs. For coal
enterprises, controllable costs generally include material
costs, wage costs, electricity fees, repairs fees, rental fees,
etc. And other costs occurring in the chains underground
and over ground are classified as uncontrollable costs.
Step two: Determining the activity driver and
resource driver.
Cost
allocation
fees Repairs fees
Controllable
Activity center 1
…
Calculating
controllable
cost of
activity
centers
coal
product
cost
cost
Can not be
directly
allocated
Rental fees
Manual entering
Determining resource driver
Calculating driver rate
Production driver, machine-time driver, quantity driver, footage driver…
ERP production planning and controlling subsystem
Fig. 4. Business process of coal enterprises activity-based cost accounting under ERP
corporate databases and using J2EE Connector
Architecture (J2EE Connector Architecture, JCA) to
reach integrations between business logic and enterprise
information systems, etc. Background systems afford
supporting environment for enterprise application
integration, including corporate databases and enterprise
information systems [12][13][14].
IV. ACCOUTING MODEL OF ACTIVITY-BASED
COST BASED ON ERP FOR COAL ENTERPRISES
A. Basic Procedures of Activity-based Cost Accounting
Based on ERP for Coal Enterprises
The core idea of activity-based cost accounting is
“activities consume resources and products consume
activities”. According to the basic accounting principle
above, the procedures of activity-based cost accounting
based on ERP for coal enterprises consist of the following
three steps:
Step one: Identifying and calculating resource
consumption, allocating the resource consumption value
into various resource pools.
This step is only a process of value classification. It
is neither necessary nor possible to directly credit the
consumption value into activities, so the value of resource
consumption is always classified by resource types in a
larger range than activities’. Its basic work is to establish
calculating standards of resource value and calculate the
Determine the activities according to the principle of
activity division, and make every activity to be ensured.
Once it is decided, no change shall be made arbitrarily.
The basic rules of activity costing should be carried out
through this entire process. The amount of the activity
determines that of resource consumption, and it has
noting to do with the level of final product output. The
relationship of the amount between resource consumption
and activity is often described as resource driver.
Resource driver reflects the patterns, causes and
conditions when activities consume resources.
For coal enterprises, we should choose the right
resource consumption driver for the consumption of
controllable cost, in terms of resource character, and then
calculate the amount of resource driver, which is the basis
to allocate the resource consumption to every activity.
The accurately-measured cost should be counted to the
corresponding activity. Meanwhile, the cost which can’t
be accurately measured or is co-consumed by several
resources can not be imputed to a special activity, and it
should be allocated by resource driver.
Of the controllable costs for the underground part,
material costs and wage costs can be directly counted, but
electricity, repairs and rental fees, for their specialty in
operation and management, may need to be allocated by
resource driver. Generally, the electricity fee chooses the
actual start time and power as resource driver. The large
amount of repairs fee can choose the actual load as
resource driver. And rental fees can choose actual
occupancy time as resource driver.
Step three: Allocating the resource value pool to the
activity value pool, and determining every activity cost.
Coal enterprises just have a single product. So there
is no need to allocate the activity cost to various products.
Finally, we can get the cost of coal products by
summarizing the controllable cost and the uncontrollable
cost of every activity which have been calculated in step
two. During the implementation of the three steps above,
the data about resource costs can be obtained from the
EPR financial modules, and the data that can’t get directly
need to be entered manually.
B. Business Process of Activity-based Cost Accounting
under ERP for Coal Enterprises
Considering the activity-based cost accounting,
management theory and the character of the coal
production process, we can use the ideas of activity-based
cost accounting to calculate every activity’s activity cost
by the feature of production organization in cost
accounting. Ultimately, we can calculate the cost of coal
products [15]. Figure 4 shows the business process.
V.
SUMMARY
In conclusion, ERP and ABC have the different
management fields, but they have the basis for integration:
the same costing objects, the same ideas for cost
management and the same management purposes. So it is
necessary and feasible for the integration between the two.
We can integrate the enterprise resource management into
activity-based costing management (This article mainly
refers to the activity-based cost accounting), which will
provide the activity-based costing management with
timely and reliable raw data. Instead of manual operation,
computer and network will speed up the cost accounting.
So it is more effective to carry out the activity-based
costing management among coal enterprises. Meanwhile,
the feedback of original information can show us the
formation process and resource consumption of every
activity timely. Tracing the origin through the activity
analysis, we can continuously improve operation
processes and production methods by the principal of
uniting function and economy to rationally allocate the
limited resources. Finally we can achieve the goal of
sustainable cost reduction.
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