Responsibility cost control system in China: The Han Dan experience

This article introduces the responsibility cost control system installed at Han Dan Iron and Steel Company in the People's Republic of China. The company has adopted a series of management accounting techniques or procedures in its cost control system, including target costing, responsibility accounting, standard costing, flexible budgeting, internal transfer pricing, behaviour motivation, performance evaluation, variance analysis and so on. In particular, the system has integrated responsibility accounting and cost control by introducing market mechanisms to substantially reduce production costs and raise profitability. The Han Dan experience demonstrates that management accounting can play a positive role in improving business management and profitability in China or other developing countries. In addition, the results of this field study cast light on effective diffusion of management accounting practices under different social and economic systems.