DuPont Model and Product Profitability Analysis Based on Activity-based Costing and Economic Value Added

Although DuPont analysis is widely used it is not easy to provide accurate performance information based on DuPont profitability analysis, which is established on the basis of traditional accounting earnings. Since Activity-based Costing (ABC) and Economic Value Added (EVA) are advanced approaches to costing activities and estimating economic profit of a firm, DuPont analysis using ABC and EVA information can be more appropriate in understanding Return on Equity (ROE). In this paper we set up an improved EVA-ABC based DuPont analysis system as well as its relative indices. Then it is applied to traditional profitability analysis to get a better performance measurement. The results show that the improved system can reduce the negative impacts of accounting principles and objectively reflect the operating performance of the enterprise. It also provides more accurate information for decision makers. Keywords: DuPont Analysis; Activity-based Costing; Economic Value Added; Profitability Analysi

Product Pricing Based on Activity-Based Costing

Activity-based costing could provide relatively accurate cost information and better serve the enterprise’s product pricing decision. Through the analysis of cost behavior on activities, it divides product costs into unit level, batch level, product-sustaining level and facility level activity costs, which can avoid the overlapping between the costs caused by dividing the costs into variable cost, activity cost and fixed cost. On this base, product pricing model is established based on the information of activity based costing. Case study shows that different pricing methods get different prices, which will provide different product-mix pricing decisions for enterprises. Keywords: Activity-based costing, Pricing decisions, Cost behavio