THAI NGUYEN UNIVERSITY

INTERNATIONAL SCHOOL

EVALUATING THE COST MANAGEMENT

AT G6 ENGINEERING CONSULTANTS COMPANY LIMITED

An Undergraduate Thesis

Presented to

The Department of Economics and Management

International School of Thai Nguyen University

The Socialist Republic of Vietnam

In Partial Fulfillment

Of the Requirements for the Degree

Bachelor of Sciences

Major in Accounting & Finance

By

NGUYEN THI THUY TRANG

Thai Nguyen, 2021

 THAI NGUYEN UNIVERSITY
International School

UNDERGRADUATE THESIS APPROVAL

Part A – Candidate’s Information

(To be completed by the candidate)

Full name: Nguyen Thi Thuy Trang

Class: AFK6
Student’s ID: DTQ1653403010094
Email Address: trangnguyen98bn@gmail.com
Telephone No.: 0339740111
Title of Thesis (print in BLOCK letter): EVALUATING THE COST
MANAGEMENT AT G6 ENGINEERING CONSULTANTS COMPANY LIMITED

Part B – Supervisor’s Recommendation for Final Defense

(To be completed by the supervisor)

I have checked the candidate’s Thesis and hereby recommend to the committee for the
final defense.
Supervisor’s Name:______________________________________________________
Department:____________________________________________________________

Supervisor’s Signature:_______________________Date:_________________________

Part C – Submission of Thesis

(To be completed by the candidate)

I hereby submit two (02) copies of my Thesis which have been checked and
recommended by my supervisor and through the Head of Department for final defense.
Candidate’s Signature Date

ii
 DECLARATION OF ORIGINALITY

I, Nguyen Thi Thuy Trang, hereby declare that this thesis and the work reported herein

was composed by and originated entirely from me. Information derived from the published

and unpublished work of others has been acknowledged in the text and references are given in

the list of sources. This work presented here has not been previously presented at this or any

other university for similar purposes.

Date of submission (dd/mm/yyyy): 19/03/2021

Signature of declarer: _________

iii
 ACKNOWLEDGEMENTS

I would like to extend thanks to the many people who so generously contributed to the

work presented in this thesis.

Special mention goes to my enthusiastic supervisor, M.A Vu Thuy Ha. My study has

been an amazing experience and I thank her wholeheartedly, not only for her tremendous

academic support, but also for giving me so many wonderful opportunities.

Similar, profound gratitude goes to Ngo Tao Duc, who has been a truly dedicated

mentor. I am particularly indebted to him for his constant faith in my lab work, and for his

support when so generously hosting me in G6 Engineering Consultants Company Limited. I

have very fond memories of my time there.

Finally, but by no means least, thanks go to mum, dad for almost unbelievable

support. They are the most important people in my world and I dedicate this thesis to them.

iv
 TABLE OF CONTENTS

DECLARATION OF ORIGINALITY..................................................................................iii

ACKNOWLEDGEMENTS....................................................................................................iv

TABLE OF CONTENTS..........................................................................................................v

LIST OF ABBREVIATIONS...............................................................................................viii

LISTS OF TABLES AND CHARTS......................................................................................ix

ABSTRACTS.............................................................................................................................x

TÓM TẮT.................................................................................................................................xi

CHAPTER 1: INTRODUCTION............................................................................................1

1.1. Introduction.....................................................................................................................1

1.2. Background of the study.................................................................................................2

1.3. Statement of the problem................................................................................................3

1.4. Research questions, objectives........................................................................................3

1.4.1. Research questions..................................................................................................3

1.4.2. Objectives................................................................................................................3

1.5. The Significance of the study.........................................................................................4

1.6. The Scope and Limitations of the study.........................................................................4

1.6.1. Research scope........................................................................................................4

1.6.2. Limitations of the study...........................................................................................4

1.7. Definition of terms..........................................................................................................5

CHAPTER 2: REVIEW OF RELATED LITERATURE AND STUDIES.........................6

2.1. Related literatures...........................................................................................................6

2.1.1. Theoretical basis on the cost management in the enterprise..................................6

2.1.2. The concept of cost in strategic management.........................................................8

2.1.3. Production costs and cost classification in the enterprise....................................10

2.2. Related studies...............................................................................................................14

v
CHAPTER 3: RESEARCH METHODOLOGY.................................................................16

3.1. Data collection methods................................................................................................16

3.2. Data processing methods..............................................................................................16

CHAPTER 4: FINDINGS AND DICUSSION.....................................................................17

4.1. Overview about G6 Engineering Consultants Company Limited...............................17

4.1.1. Introduction about G6 Engineering Consultants Company Limited....................17

4.1.2. Functions, duties and business area of the company............................................18

4.1.2.3. Labor resources..................................................................................................19

4.1.2.4. Business performance at G6 Engineering Consultants Company from 2017 to

2019.................................................................................................................................19

4.1.2.5. Organizational structure of the management apparatus...................................21

4.1.3. Product characteristics.........................................................................................22

4.1.4. Cost classification at G6 Engineering Consultants Company..............................24

4.2. Cost management at G6 Engineering Consultants Company.....................................26

4.2.1. The general evaluation of cost management at G6 Engineering Consultants

Company Limited............................................................................................................26

4.2.2. Evaluating the cost management at G6 Engineering Consultants Company

Limited.............................................................................................................................32

4.2.2.1. Advantages and disadvantages of the cost management at G6 Engineering

Consultants Company Limited........................................................................................32

4.2.2.2. The impact of the cost on the business performance..........................................33

4.2.3. Some solutions to improve the cost management for G6 Engineering Consultants

Company Limited............................................................................................................35

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS.......................................41

5.1. Conclusions...................................................................................................................41

5.2. Recommendations.........................................................................................................42

vi
REFERENCES........................................................................................................................43

vii
 LIST OF ABBREVIATIONS

No. Abbreviation Name of abbreviation

1 ISO International Organization of Standardization
2 SI Social insurance
3 HI Health insurance
4 TU Trade union fees
5 UI Unemployment insurance
6 VND Vietnam dong
7 WTO World Trade Organization

viii
 LISTS OF TABLES AND CHARTS

Table 2.1. Compare the role of cost management and cost accounting......................................6

Table 2.2. Comparison of past and present business environment.............................................8

Table 4.1: Business results of the G6 Engineering Consultants Company from 2017 to 201919

Chart 4.1: Organization of management apparatus at G6 Engineering Consultants Company 21

Table 4.2: Business expenses at G6 Engineering Consultants Company from 2017 to 2019. .26

Table 4.3. Analysis of production costs in the company..........................................................29

Table 4.4. General administration expense analysis table........................................................31

Table 4.5. The result of business activities in the period from 2017 to 2019...........................33

ix
 Title: EVALUATING THE COST MANAGEMENT AT G6
ENGINEERING CONSULTANTS COMPANY
LIMITED
Researcher: Nguyen Thi Thuy Trang

Degree Bachelor of Arts in Accounting & Finance

Nam/ Address Thai Nguyen University,
of the Institution International School
Date Completed March, 2021
Adviser M.A Vu Thuy Ha

ABSTRACTS

The competitiveness of the market economy in the context of deep integration with the

international economy makes the level of competition more fiercely. To stand on the market

requires businesses to plan the right strategy and make effective business decisions. These

charges decisions are based on the usefulness of cost information provided by a cost-effective

accounting model. Capital construction is a specialized industry, production process and

construction products have specific characteristics and that has a great influence on the quality

of construction products, cost in construction enterprises. However, most businesses have not

built a system of cost management criteria, so that no information on cost fluctuations. This

thesis explores cost management in today at G6 Engineering Consultants Company Limited

and suggests complete solutions.

x
 TÓM TẮT

Sức cạnh tranh của nền kinh tế thị trường trong bối cảnh hội nhập sâu rộng với nền

kinh tế quốc tế càng làm cho mức độ cạnh tranh gay gắt hơn. Để đứng vững trên thị trường

đòi hỏi các doanh nghiệp phải hoạch định chiến lược đúng đắn và đưa ra các quyết định kinh

doanh hiệu quả. Các quyết định về chi phí này dựa trên tính hữu ích của thông tin chi phí

được cung cấp bởi mô hình kế toán hiệu quả về chi phí. Xây dựng cơ bản là một ngành

chuyên môn hóa, quá trình sản xuất và sản phẩm xây lắp có những đặc thù riêng và điều đó có

ảnh hưởng lớn đến chất lượng sản phẩm công trình và giá thành trong các doanh nghiệp xây

dựng. Tuy nhiên, hầu hết các doanh nghiệp chưa xây dựng được hệ thống tiêu chuẩn quản lý

chi phí. Luận văn tìm hiểu công tác quản lý chi phí hiện nay tại Công ty Tư vấn Xây dựng G6

(TNHH) và đề xuất các giải pháp hoàn thiện.

xi
 CHAPTER 1: INTRODUCTION

1.1. Introduction

Vietnam has officially joined the World Trade Organization (WTO), which not only

creates opportunities for domestic businesses but also challenges for businesses themselves. It

is an opportunity to access the world's achievements and difficulties in competition when

foreign enterprises can invest more smoothly in the Vietnamese market. In that trend,

businesses that want to survive and develop sustainably require business managers to have

effective business plans, capture the psychology and needs of consumers with products that

are diversified, rich, high quality and competitive price to maximize the profitability of the

business.

Cost is the quality indicator that reflects the nature of the production situation of an

enterprise. When the enterprise tries to find a business idea to bring revenue to the enterprise,

the use of costs in the business production process must be reasonable, economical, and

properly reflect the production situation. Thus, the correct determination of costs will help

business leaders to evaluate the efficiency of production in order to propose effective

measures to improve profitability and increase competitiveness.

One of the conditions that help businesses improve their competitiveness in the

international arena is to have a modern system of management science, including economic

management science, but accounting is an essential part. In enterprises, the collection of costs

is always an important task and a measure of operational efficiency. Cost management is a

central aspect of corporate accounting. Therefore, constantly researching and perfecting the

theory and practice of costs in the Vietnamese enterprise accounting system is really

necessary in the present conditions.

Through the process of researching the business situation at G6 Engineering

Consultants Company Limited, especially cost management is urgent in terms of both

practical theory, as well as the process of capturing and finding understanding the business
situation at G6 Engineering Consultants Company Limited, I chose the topic: "Evaluating the

Cost Management at G6 Engineering Consultants Company Limited" as the research subject

for my thesis.

1.2. Background of the study

Currently, Vietnam as well as the world are increasingly trying to step forward on the

path of development, enriching the country and the community, each day taking a new step on

the path of bringing a world more and more full and happy as ever hope. Vietnam, with a

thousand years of culture, is also striving eagerly on the path of building a socialist-oriented

market economy. In that determination to build and enrich the country, there are so many

works that have been built, buildings and roads adorn the national space as well as better meet

the need for food, wear, accommodation, travel, but very important needs of each person. On

that development momentum, construction is an industry in an upward development trend.

The construction industry has developed steadily over the years mainly thanks to the

positive influence from the real estate sector. With the rapid urbanization rate and the

increasing ratio of urban population to total population, construction demand in Vietnam is

always high. Vietnam plans to expand investments in infrastructure projects to help support

overall construction output growth while focusing on improving regional connectivity through

transport infrastructure development. At the same time, the State promotes investment in

large-scale industrial projects, domestic manufacturers boost investment in factories and

production facilities. Although occupancy rates in industrial zones in key provinces are

increasing rapidly, Vietnam's industrial land bank is still abundant.

Starting from that requirement, accountants must provide specific information about

costs so that corporate administrators can check, make decisions on prices, investments and

choose production plans. Cost management is important in setting up information systems for

corporate operations and internal management. Cost management is considered as a scientific

2
and effective management tool to promptly process and provide information on costs, to meet

information needs for administrators.

1.3. Statement of the problem

The thesis proposal aims to research the general theory and current situation of cost

management at G6 Engineering Consultants Company Limited and recommend some

solutions to improve the cost management at the company.

1.4. Research questions, objectives

1.4.1. Research questions

- What theoretical basis is the cost management in the enterprise?

- What is the current situation of cost management at G6 Engineering Consultants

Company?

- Which solutions needed to improve the cost management at G6 Engineering

Consultants Company?

1.4.2. Objectives

Theoretical objectives:

- Systematizing and clarifying common theoretical issues about cost management.

- Researching and analyzing clearly the basics of cost management in terms of

management accounting.

Practical goals: Applying the theory of cost management to analyze and evaluate the

current situation of cost management at G6 Engineering Consultants Company Limited to

improve costs in order to upgrade executive capacity, organize effective operations of

business activities.

3
1.5. The Significance of the study

The topic further clarifies the general theoretical basis for cost management in G6

Engineering Consultants Company Limited.

Overview of the current situation of cost management at G6 Engineering Consultants

Company: analyzing, evaluating the results, limitations and problems in cost management.

Therefore, the writer offers solutions to improve cost management at the company.

1.6. The Scope and Limitations of the study

1.6.1. Research scope

Research space: Thesis research was carried out at G6 Engineering Consultants

Company Limited.

Time of research: Thesis researching the current situation of cost management at G6

Engineering Consultants Company Limited.

Scope of the research: The thesis focuses on researching the current situation of cost

management at G6 Engineering Consultants Company Limited and gives some solutions.

The analysis is based on data from 2017 to 2019.

1.6.2. Limitations of the study

The topic just stops at understanding cost management at G6 Engineering Consultants

Company Limited. However, cost management has only been mentioned recently and is still

quite new to Vietnamese businesses; the implementation of cost management still faces many

difficulties and solutions completing cost management at the unit drawn from theoretical and

practical research. This is a broad and complex topic, the implementation time as well as the

practical approach is limited, so this article has not been able to thoroughly solve all

problems. In the future, if given favorable conditions, I would like to continue to research

more deeply in order to further improve the cost management at the company.

4
1.7. Definition of terms

Costs are the resources used to make a product. It is expressed in monetary terms. Cost

is the expense a company incurs in creating a product. It also includes how much the company

spent bringing the product to the market. The price, on the other hand, is the amount the

customer pays for it. In other words, how much it sold it for. The difference between a

product’s cost and price is the profit a business makes.

Cost management is a process of planning and controlling the budget of the project.

Cost management predicts the expenditure and reduces the project from going over budget.

5
 CHAPTER 2: REVIEW OF RELATED LITERATURE AND STUDIES

2.1. Related literatures

2.1.1. Theoretical basis on the cost management in the enterprise

2.1.1.1. Concept

Cost management is the analysis of the information needed for the job administration

of a business. This information includes financial information (expenses and revenue) and

non-financial information (productivity, quality and other firm factors).

The expense manager is not simply a record taker of information on costs but also

plays an important role in making management decisions in order to be able to provide

customers with these products/services with the best quality at the lowest cost.

2.1.1.2. The role of cost management

Cost management helps businesses focus their capabilities into strengths, looking for

opportunities or important issues in production and business.

Cost management helps businesses improve quality products or services without

changing costs.

Cost management helps decision-makers to identify the lowest cost resource in

production and supply goods or services.

Table 2.1. Compare the role of cost management and cost accounting.

Cost management Cost accounting

- Expense record - Record of expenses incurred

- Analysis of information related to costs - Prepare expense reports

- Identify business opportunities

- Make decision

6
2.1.1.3. Cost management in the current business environment

The current business environment has a lot to change and has change the real cost

management of businesses.

 Global business environment.

Currently, the business environment has expanded to the staggered market gender,

making businesses subject to competitive pressure on regulations global tissue. Therefore,

businesses need more information about expenditure management cost more to be able to

build competitive and business strategy effective.

 Production technology

To compete effectively, businesses must accept receive production technology

changes. This not only helps enterprises can control the inflow of costs (raw materials, labor,

other expenses) but also can formulate decisions for production outputs (selling price,

volume, revenue, profit, inventory).

 Customer orientation

Another important change of the business environment today is the constantly

changing customer tastes for products/services. Surname like products with high quality, with

many new features, multi-design form, the attached services must be rich. So business

strategy of the business is to satisfy these requirements at a cost. The role of cost

management, therefore, becomes very important because if not well managed and analyzed,

the product is of high-quality but the price will also be high, customers will not like it

anymore.

 Organizational management

Because the goal is to satisfy the tastes of customers, production and business

activities also moved in the direction of customer. Therefore, the organization of the business

also changes and looks into functional groups or divisions (research studies development,
7
production, delivery, warranty, and repair). Real cost management practice will also be

changed accordingly. The group/department will have its own operating expenses. Reports on

whether the cost will reflect the performance of the groups/divisions reasonably or not

reasonable.

Table 2.2. Comparison of past and present business environment

Before Now
Competitive environment Large-scale economy, The focus is on quality,
standardizing products functionality and customer
satisfaction product
Production process High output, large inventory Low output, low inventory,
minimizing costs

Production technology Automatic cable assembly line, Robot system, using

using separate technology in interlinking technology
each stage through a network system
Labor skills Requirements are low High requirement
Consumption market Mainly domestic Consumption globally
2.1.2. The concept of cost in strategic management

2.1.2.1. The cost driver

A cost agent is any factor that has a change effect total cost.

To produce products or services we need materials, labor, electricity, water,

machinery… When used they create out cost: raw material cost, labor cost, and other costs.

With different usage levels, they create total cost levels different. Those are the cost

drivers.

Summary: For the enterprise, to achieve a low cost, then the administration of the cost

drivers is very important.

2.1.2.2. Cost pool

It is the aggregation of costs into groups. There are many ways to divide into groups

and thus there are many ways of cost group:

8
 - By cost form (labor cost group, raw cost group material…).

- By source of cost (cost of the production department, odometer plan, warehouse

management department...)

2.1.2.3. The cost object

The payee is a product/service must receive all costs related to administration and

production.

2.1.2.4. Fixing costs and allocating costs

Cost fix is to put costs directly into the expenditure group fee or subject to receive the

cost. Example: cost of raw materials, direct labor costs are the direct cost of production

products or services. These costs are easy to calculate when we analyze the cost of a product.

Cost allocation is to bring indirect costs to the cost group or subject to receive the cost.

These indirect costs are difficult be exact for a cost receiver. Therefore, it does can be

allocated to the payee on a certain basis that joint karma is the most suitable. For example, the

cost of electricity and water is possible allocate to expense groups on the basis of the number

of hours the machine is running.

Thus, the number of machine hours is called the base of allocation, or cost of

indirectly allocated departments on the basis of the number of hours worked by direct labor...

Actually, for simplicity and ease of calculation, cost administrators accept using the

average indirect cost method per product (total that indirect cost divided by the quantity the

product is manufactured. Each product receives the same cost share together). However, this

method did not show the level of using cost factors for each product or service.

2.1.3. Production costs and cost classification in the enterprise

2.1.3.1. Production cost

Production and business activities of an enterprise are essentially the process of

consuming production and business factors, including labor materials, labor objects and labor
9
force to create products and jobs and certain labor force to meet the production and

consumption needs of society. In this process, the enterprise consumes a part of its resources,

which incurs costs and creates new resources in the form of jobs, products, and labor.

“Cost can be understood abstractly as the monetary manifestation of the total waste of

living labor and physical labor arising in the process of production and business activities or

the cost is the cost of resources economy, on specific assets used in production and business

activities” (According to Ph.D. Huynh Loi and Ph.D. Nguyen Khac Tam, Cost Accounting,

2002).

From the perspective of financial accounting, the costs are considered the costs

incurred associated with production and business activities in the accounting period, the value

of a resource consumed in the production and business activities of the organization to

achieve a result.

In terms of management accounting, costs are considered the actual costs associated

with the plans, products and services. Business costs from the point of view of management

accounting are always specific in order to consider the efficiency of departments, which is the

basis for making investment decisions or choosing the optimal options.

2.1.3.2. Production cost classification

There are many ways to classify costs according to different criteria:

 Cost classification according to the relationship between the cost and profit

determined each period

Product costs: Are the costs associated with the production of the product or the

process where the goods are purchased. The cost of a product is recognized as the cost (called

cost of goods sold) at the time the product or service is consumed. When products or goods

are not sold, these costs are in product or inventory (called inventory costs).

10
 Period costs: All costs other than product costs are classified as period costs. These

expenses are recorded as an expense in the period they arise and reduce the income in that

period. Period costs include cost of sales and cost of business management.

 Cost classification based on cost aggregation method and cost bearers

Direct cost for a cost-bearing object is the type of cost directly related to the cost-

bearing object and can be calculated directly for that object in an efficient/inexpensive way.

Therefore, if this type of cost accounts for the majority of the total cost, it will be convenient

to control costs and determine the cause of costs.

Indirect cost for a cost-bearing object is the type of cost related to the subject bearing

the cost, but cannot be effectively calculated directly to the object bear the cost. Rather,

indirect costs are the costs associated with many cost subjects. Thus, the indirect costs are

distributed to cost bearers by the cost allocation methods.

 Classification by cost manners

Variable costs are those that change with change in the organization's level of activity.

The level of business activity here can be the number of products produced, the number of

products consumed, the sales made... This type of expense has characteristics, if considered

by total, the variable charge changes proportional to the level of activity, but when measured

per unit of operating volume, the variable can be a constant.

Fixed costs (constant, variable costs): are costs that don't change in total when there is

a change in the operational level of the unit. This kind of cost has a feature that, in terms of

total, the costing is constant, whereas, on the basis of the activity volume, the pricing is

inversely proportional to the level of activity. Thus, for this type of cost, whether the business

is active or inactive, there always exists a fee and vice versa, when the enterprise increases the

level of operation, the fee will gradually decrease.

 Classification based on cost control ability for managers

11
 Controllable costs: Are the costs that managers at a certain level of management can

determine its arising amount and have the authority to decide on that cost.

Uncontrollable costs: are the costs that managers at a certain level of management

cannot accurately predict their arising and have no authority to decide on such expenses.

Through this classification, it helps administrators at each level to plan cost estimates

more correctly, limiting the passive in mobilizing resources to ensure expenses. At the same

time, it helps senior executives to give directions to increase the cost of control for each

expansion level, develop production and business processes with a higher percentage of fees,

decentralization of expenditure more details about indirect costs serving production and

business management.

 Cost classification by functional area of the organization

a. Production costs: Production costs are classified into three cost categories: direct

raw material cost, direct labor cost, and general production cost.

Direct raw materials: raw materials consumed during the production process that

constitute the entity of the product. In other words, the cost of raw materials is the value of the

materials that make up the entity of the product, which can be calculated directly for each type

of product.

Direct labor: direct labor is those who directly produce the product, their labor is

directly attached to the production of the product, their labor is directly wasted on the product

being produced. Direct labor costs include salaries, wages, allowances and salary deductions

such as social insurance and health insurance. Direct labor cost is calculated directly on each

product produced, it can be clearly defined and specific to each product.

General production costs: production costs, in addition to direct raw material costs and

direct labor, are classified as overheads. General production costs include indirect material

costs, indirect labor costs, depreciation costs of fixed assets, utility costs such as electricity,

water and other production costs. Production costs are characterized by the fact that they

12
cannot be directly calculated on the product, they will be included in the product cost through

the allocation of costs.

b. Non-production costs:

Non-production costs include selling costs and business management costs.

Selling expenses: Selling expenses are costs incurred related to the sale of products,

including all costs necessary to implement and accelerate the process of goods circulation and

distribution and ensure the delivery of goods to consumers. Selling expenses include expenses

such as advertising and promotion expenses; expenses for salaries of salespeople, depreciation

of fixed assets, costs of raw materials, packaging used for sales, sales commissions.

Management costs: Management costs are costs incurred related to the organization,

administrative management and costs related to office activities of the enterprise that cannot

be classified in the production costs or selling costs categories. Administration costs include

salary costs for corporate managers and office staff, depreciation costs of fixed assets (office

and office equipment), stationery costs and cost of outside purchasing services, etc... All

organizations (business or non-business organizations) have management costs.

 Types of costs used in choosing the option

Cost difference: are the lost benefits when choosing this business plan instead of

choosing another business production plan. This type of expense is not reflected in the

accounting books but has a very important role, requiring managers to consider and consider

before making a decision. In the selection of production options, the opportunity cost is

considered relevant information.

Sunk costs: are costs incurred that force the administrator to accept it and exist in all

production and business plans. Therefore, this cost cannot be eliminated, this information is

not appropriate for the consideration and selection of the optimal option and therefore when

choosing the optimal option, this cost should not be considered.

13
2.2. Related studies

The research topic on costs has been studied by many authors, it can be said that this is

an important issue in any business and its current situation is always an issue that many

authors want to pursue. Previous studies have shown successes, advantages both in terms of

theory and practice, but still have certain limitations.

Master thesis "Cost management at Mining Company Limited – Dong Bac

Corporation" - Quan Thi Phuong Dung (2019). In his dissertation, the author systematized

and clarified the basic contents of cost management, clarifying the business operation

characteristics of Dong Bac Corporation and the current situation of cost management. In this

business, making conclusions and solutions to complete the company's existing problems,

thereby serving as a practical basis for making solutions to improve cost management of the

enterprise.

Master thesis “Completing cost and revenue accounting at AIC commercial joint stock

company'' by Nguyen Trong Binh in 2018 systematized the basic theories related to revenue

and expenses. Research thesis on financial accounting is mainly. However, the dissertation

has not analyzed the reasonableness and irrationality in the stage of organizing the accounting

work as well as not paying attention to perfecting the organization of the accounting

apparatus.

Master thesis "Cost and revenue accounting at Tran Anh Digital World Joint Stock

Company" by Vu Quoc Duong, University of Commerce, 2017. The author generalized the

basic issues. on cost and revenue accounting. Since then apply to research, analysis and

assessment of the current accounting status at Tran Anh Digital World Joint Stock Company

in the field of financial accounting. The author has given a number of solutions to improve

cost and revenue accounting at Tran Anh Digital World Joint Stock Company. However, the

thesis has not analyzed the reasonableness and irrationality in the stage of organizing the

14
accounting work as well as not focused on the improvement of the accounting work

organization, the accounting apparatus in the enterprise.

In addition, there are many other research works of the authors who are students of the

school. In general, the above articles have partly shown us the shortcomings and difficulties

related to cost management as well as the solutions that the authors give to that problem.

However, up to now, there have been no research projects to research, analyze, evaluate and

complete the cost and revenue accounting at G6 Engineering Consultants Company Limited.

Therefore, the issue that needs to be researched here is: cost management at G6 Engineering

Consultants Company Limited in terms of financial management, in order to help

administrators clearly see limitations and giving solutions as well as applicable conditions to

perfection, aiming to reduce product costs, increase profits, improve the efficiency of

production and business activities, and the company is growing.

15
 CHAPTER 3: RESEARCH METHODOLOGY

3.1. Data collection methods:

 Document research method

Refer to the dissertations and topics on business management to learn from experience

and systemize the theoretical basis of cost management.

 Observation method

Collecting information through the use of senses and supporting devices to directly

observe the accountant performing the accounting, recording all factors related to the research

object, in accordance with the research objectives are to describe and identify research

objects.

 Data collecting method

It is used to collect necessary information and data by photocopying, taking photos or

hand-copying invoices, vouchers, accounting books as a basis for proving economic and

financial transactions arising. The basis for using this method is to use accounting vouchers to

reflect the arising economic transactions.

3.2. Data processing methods:

Method of comparing and analyzing data: Applying this method to compare the

quantified economic indicators and phenomena with the same content and similar properties

to determine the trend and volatility of indicators. It allows us to synthesize the general

features, separate out the characteristics of the phenomena for comparison, on that basis to

evaluate the aspects of development or underdevelopment, efficiency or inefficiency to find

out methods optimal management in each specific case.

Integrated approach: From the initial collected data, systematically synthesized

according to each process, comparing the actual situation in the period from 2017 to 2019,

from which there are separate comments on the cost management at the company.
16
 CHAPTER 4: FINDINGS AND DICUSSION

4.1. Overview about G6 Engineering Consultants Company Limited

4.1.1. Introduction about G6 Engineering Consultants Company Limited

G6 Engineering Consultants Company Limited was established in 2008, is a

consulting business in the field of construction investment in transport infrastructure,

industrial and civil. The company has experience in consulting services for all phases of

projects following Vietnam's basic construction investment procedures. Over the past 12 years

operating in the field of surveying, designing, monitoring and managing construction, the

company's services are increasingly diverse and rich. The company has been constantly

developing and becoming one of the strong brands in the construction industry in Bac Ninh

province. The G6 brand reputation has been confirmed with hundreds of construction

projects, large and small in the region. G6 Engineering Consultants Company not only

focuses on making profits, but also solving social problems.

G6 activities currently include many areas: Setting up of construction investment

projects, construction survey, construction design, verification of the effectiveness and

feasibility of investment projects, verification of construction design, cost estimation and total

cost estimate, consulting bidding, selection of contractors in construction activities,

construction supervision and installation of construction equipment, quality inspection of

works construction, design and construction of interior and exterior works and other

consulting services at the request of customers, in accordance with the regulations of

Vietnam. In particular, based on the core strength of construction consultancy and supervision

is an important factor to promote strong revenue growth. From that foundation, the G6 is and

will continue to grow further into the future.

With the strength of experience, technology and human resources, G6 always actively

grasp, make in-depth investment, apply new techniques, improve management capacity, and

17
improve structure, in order to continuously improve high quality of products and services,

ensuring competitive advantage and sustainable development of the company.

4.1.2. Functions, duties and business area of the company

4.1.2.1. Function

According to the business registration license of G6 Engineering Consultants

Company, the Company has the following functions: Construction of industrial, transport,

irrigation, electricity and water works; Construction of houses of all kinds, ground

preparation, and installation of electrical systems.

4.1.2.2. Duty

The company has a duty to ensure good performance in the above-registered industries

and business areas. Constantly evolving in all aspects to bring profits to business owners, at

the same time create jobs and jobs for existing employees. Besides, the fulfillment of

obligations to the state through the payment of taxes and fees as prescribed makes an

important contribution to the socio-economic development in Bac Ninh province in particular

and the whole country in general.

Currently, G6 Engineering Consultants Company is focusing on two big business

segments: civil construction - industry and transportation.

The company specializes in the construction of civil, industrial, construction projects

with high quality, technical and artistic requirements such as hotels, complexes of offices,

high-class houses...

Although being a small business, born in a difficult economic situation, production

and business activities have also achieved many commendable results. Currently, the

company has created jobs for many workers in the construction industry and the office

department. Not only that, the company continues to invest, expand the scale of development,

18
in order to maintain and further develop the achieved results. G6 will continue to grow further

and become one of the big enterprises in the construction industry in Bac Ninh in the future.

4.1.2.3. Labor resources

Labor is always an indispensable resource for every enterprise, besides financial

resources, the human factor contributes to the enterprise's labor force, thanks to the labor

force that produces products. At G6 Engineering Consultants Company, the human factor

plays an important role and is always on top; each individual's achievements are valued and

recognized by the director. Therefore, the scale and quality of human resources of the

company are growing.

4.1.2.4. Business performance at G6 Engineering Consultants Company from 2017 to 2019

Table 4.1: Business results of the G6 Engineering Consultants Company from 2017 to
2019

Unit: million VND

2017 2018 2019
1. Revenue 134.374,0 143.506,0 159.321,0
2. Net revenue 133.520,0 142.583,0 158.089,0
3. Cost of goods sold 110.743,0 122.086,0 137.962,0
4. Gross profit 22.777,0 20.497,0 20.127,0
5. Selling expenses 9.712,0 7.428,0 8.756,0
6. Enterprise administration 8.396,0 6.854,0 7.432,0
expenses
7. Net profit 4.669,0 6.215,0 3.939,0
8. Profits from financial activities 215,0 385,0 985,o
9. Other profits 112,0 432,0 512,0
10. Total profit 4.996,0 7.032,0 5.436,0
11. Profit after tax 4.747,0 6.681,0 5.164,0
(Source: Financial report of G6 Engineering Consultants Company from 2017 to

2019)

According to the method of comparing production and business results between years

in the research period, the basic indicators show:

Comparing absolute numbers shows that, total revenue between years has increased, in

2017 increased by 9,132.0 billion and in 2019 increased by 15,815.0 billion compared to 2017.
19
This shows the scale of investment for development production and business, especially in 2019

compared to 2017 increased 73.18%. Relative numerical comparison shows the completion of

plans, projects and norms. In particular, the growth rate between years has increased, in 2018 it

increased by 6.7% compared to 2017; 2018 increased by 11% compared to 2018, resulting the

growth rate of the next year higher than the previous year and exceeded 4.3%.

However, it is worth noting that the increase in total profit is not proportional to the

increase in total revenue.

In 2018, total revenue increased by 9,132.0 billion dong compared to 2017 and

brought the Company a pre-tax profit of 2,036.0 billion dong. The value of total revenue for

2019 is 15,815.0 billion VND but the balance for pre-tax profit is -3,400.0 billion VND

(excluding the obligation to pay 5% corporate income tax). This will be analyzed in the

following sections to find the cause of this phenomenon.

But if we go through the criteria in the table, the cost of goods sold increases sharply.

In 2018, an increase of VND 11,343.0 billion compared to 2017, and in 2019, an increase of

VND 15,876.0 billion compared to 2018. The growth rate of cost of goods sold increased

much faster than the growth rate of total revenue: 2018 3.5% higher and 0.2% higher in 2019.

Selling expenses and administrative expenses improved more in 2018, but increased sharply

in 2019. From the decrease in selling expenses in 2018 of VND 2,284.0 billion, to VND

1,328.0 billion VND in 2019 and the decrease in administrative expenses in 2018 of 1,542.0

billion VND increased to 578.0 million VND in 2019 another spike. In 2018-2019, profits

from financial activities both increased sharply by 79% and 155%. And revenue from other

activities increased by 285% and 18.5%.

Total revenue increased but total profit decreased and a negative balance was an

unusual phenomenon. It is necessary to further analyze production results related to cost and

other constituent factors to find out the cause of this situation.

20
4.1.2.5. Organizational structure of the management apparatus

 Organizational structure

The company's management structure is arranged in a functional online style with the

highest operating organization being the Director. Requests and instructions will be passed

down to specific departments within the company to quickly capture and execute. This model

enables the head to quickly capture and update the events of the company, thereby quickly

operating measures. Besides, other parts can also directly complement each other, helping

each other to complete the assigned tasks well. Below is the organizational structure of the

management apparatus of the Company.

DIRECTOR

Design Department Technical Department Administration

and Accounting
Department
Bidding staff Construction manager

Contracting
Design consulting staff Superintending Officer officer

Architects Accountants
Engineers

Chart 4.1: Organization of management apparatus at G6 Engineering Consultants

Company

 Functions and duties of departments

The Director of the company has the duties and powers: Decide the direction, plans,

production - business projects and major policies of the company. Decide on organizational

and executive issues to ensure high efficiency in production and business.

Accounting department:

21
 Organize economic accounting for the whole company on production and business

activities of the company in accordance with the Law on accounting and statistics of the State

synthesizing business results, make statistical accounting reports, and analyze production and

business activities to help the Director check the implementation of the company's plan. This

department is responsible for ensuring the company's benefits such as salary, bonus, revenue,

expenditure...

Administrative offices:

This department is responsible for the personnel situation of the company: being

responsible for monitoring, urging, managing and recruiting personnel, assigning employees

in suitable job positions to ensure human resources for production; be responsible for all kinds

of documents, papers, records, books in the company; deploying the company's rules,

rewarding and welfare activities.

4.1.3. Product characteristics

Construction products are of a single and individual nature:

Each construction object is each work, work item, requiring appropriate technical

requirements, structure, form, and location, specifically determined on each design and

estimate of each object separate construction.

Therefore, when constructing construction, G6 Engineering Consultants Company

must always change the method of construction organization, construction methods to suit the

characteristics of each type of product, ensure construction brings the highest economic

efficiency and continuous production. For example, the construction contract for Dong

Nguyen Primary school was implemented in Dong Nguyen district, Bac Ninh province, while

the construction, renovation and repair of Rural road of Vinh Tho village were carried out

currently in Bac Ninh.

22
 Due to the single and individual nature, the cost spent for the construction and

installation of works has a different content and structure as industrial products.

Products with large volume, great value, relatively long construction time:

The period for the cost of construction products is not determined monthly as in

industrial enterprises, but is determined depending on the specification of each project, which

is reflected through the payment method between G6 Engineering Consultants Company with

customers.

For G6, usually choose the price calculation object that is the construction product

completed to the conventional stage, periodically at the end of the fiscal year, the company

organizes the calculation and determination of the product cost.

Construction is seasonal:

Construction production usually takes place outdoors, is directly affected by

environmental factors, weather, extreme climate, monsoons or storms... so construction is

seasonal.

Besides, environmental and weather factors affect construction techniques,

construction speed and progress, at the same time, G6 Engineering Consultants Company

always has to pay attention to measures to preserve construction machines and outdoor

materials such as building tents, canvas for shielding, using large canvas to cover the

construction machine.

Long-term construction and outdoor activities also create many factors that cause

unexpected damages to the company such as damage to back and forth, damage to stop

production...

Construction production is done on upheaval locations:

Construction products of a fixed nature, associated with the construction site, when

completed, not are stocked as other physical products. In addition, during the construction
23
process, the company's construction team must frequently relocate. Therefore, there will be

some necessary costs such as the cost of labor mobilization, construction of construction

machines, construction costs of temporary works serving workers...

Consumption characteristics in construction and installation:

The process of product consumption in construction is the process of handing over

completed construction products to customers. Therefore, when the project is completed, G6

and its partners will take over the work together at the construction site, the products will not

be put into storage like other physical products.

4.1.4. Cost classification at G6 Engineering Consultants Company

4.1.4.1. The cost of materials directly

Direct raw material cost is considered as an influencing and decisive factor on the

production process as well as business results of the company because it is directly related to

product cost. The company's materials are mainly purchased from outside, with a variety of

types and great value. The cost of raw materials accounts for more than 60% of the total cost.

Therefore, when this factor is strictly controlled, it contributes to increase profits for the

company. Direct material costs include:

Main materials: are materials involved in the manufacturing process that constitutes a

product. Main raw materials include: brick, sand, stone, gravel, cement, iron and steel...

Secondary materials: are materials that are effective in the manufacturing process,

combined with the main material to change the color, appearance of the product, helping to

increase product quality or guarantee for operation process, serving the needs of technology,

engineering and management... The company's auxiliary materials include: paint, nails,

purlins...

24
4.1.4.2. Direct labor costs

Direct production labor cost is one of the three basic factors that make up the product

cost. Direct labor cost items include salaries and deductions based on wages and production

costs such as social insurance (SI), health insurance (HI), trade union fees (TU), and

unemployment insurance (UI) of workers directly included in the product cost. Salary

deductions include:

SI: deducting 26% of the total basic salary to be paid to employees, of which 18% is

included in production and business costs, 8% deducted from the total salary of employees.

TU: deduct 2% of the total basic salary to be paid to employees.

HI: deduct 4.5% of the total basic salary to be paid to employees. In which: 3%

deduction to calculate the cost of production and business and 1.5% deduct from the total

salary of the employee.

UI: 2% deduction to calculate the total basic salary payable to employees. In which,

1% is included in production and business costs and 1% is deducted from the total salary of

employees.

4.1.4.3. General production costs

General production costs include:

Worker costs: main salary, supplementary salary, allowances payable to the staff

managing the project, deductions according to salary such as HI, SI, TU and UI according to

the prescribed rate.

Tools and tools expenses: expenses for tools and tools used for general production

such as: hammers, scissors...

Depreciation expense of fixed assets: such as depreciation of machines, equipment,

cars...

25
 Charges for services purchased from outside and other monetary costs: such as

electricity and water costs, phones for general production.

4.2. Cost management at G6 Engineering Consultants Company

4.2.1. The general evaluation of cost management at G6 Engineering Consultants

Company Limited

The cost management is not just a strict and reasonable work of accounting and

calculating costs. It also includes corporate governance, field management in production and

costs incurred. To conduct production and business activities, businesses have to spend a

variety of costs, collectively known as business costs. The business cost of a firm is the

monetary expression of the costs of living and materialized labor in a given business cycle.

Business expenses include many types, with different positions and uses:

4.2.1.1. Business expenses:

We can consider the business expenditure management of the company through the

following table:

Table 4.2: Business expenses at G6 Engineering Consultants Company from 2017 to

2019

Unit: million dong

2017 2018 2019

1. Revenue 134.374,0 143.506,0 159.321,0

2. Direct materials costs 60.740,0 72.321,0 73.418,0
3. Labor costs 9.817,0 8.344,0 9.122,0
4. General production costs 11.672,0 9.281,0 10.212,0
5. Enterprise administration expenses 8.396,0 6.854,0 7.432,0
6. Total cost of production and business 100.337,0 104.228,0 108.940,0
Through the table above we can see the cost that the company must spend compared to

the increasing revenue. In 2018 total revenue increased by 9,132.0 billion dong compared to

2017 corresponding to 6.7%. The total turnover value of 2019 is 15,815.0 billion VND

26
compared with 2018 corresponding to an increase of 11%. To better understand, we can

analyze each of the following cost items:

For the direct material cost item: This expense accounted for the largest part of the

total cost of the Company, in 2018 increased 11,581.0 billion, equivalent to a rate of 19%

compared to 2017, in 2019 it increased 1,097.0 billion VND equivalent to 1.5% compared to

2018. It increased mainly due to the consumption of raw materials and the cost of raw

materials exported. This consumption reflects whether the raw materials are used

economically or wastefully while the raw materials used depends on the market price, on the

stock of raw materials. Since the management of raw material prices is almost uncontrolled

because each time a new contract is signed after handing over to a separate factory, the new

factory purchases raw materials to meet demand, raw material prices depend on the market

situation at that time and the ability to choose from the buyers of the materials.

Therefore, the price is not controlled by the company because it only approves the

level through cost estimates. In addition, the right is assigned to the buyers of the materials in

the factory, so it is easy to add raw material prices even when there is a red invoice, the

materials are bought floating in the market, so the more price control becomes difficult.

In terms of management in terms of kind: Most of the actual material consumption for

products and projects is higher than the norm. From familiar and popular products, the

management of the consumption of raw materials is relatively good, in contrast, for projects

in rural, remote and remote areas, the management of raw materials. The material is very

loose, causing high loss, high loss level, high failure rate, and defective products without

recovery measures. In fact, the management of in-kind is still weak when renting a

warehouse, only the function of checking the volume of import and export as required, not

interested in the quality of raw materials. Because of that, the cost of raw materials of the

company in general increases.

27
 For the direct labor cost item: in the company, this cost accounts for a small

proportion and tends to decrease in 2018 but increases in 2019. In 2018, it decreased by 15%

compared to 2017 but to in 2019, it increased by 9.3% compared to 2018. It shows that in

2018 the company has focused on renovating machinery and equipment; reasonable division

of labor; There are incentives for employees, contributing to increase labor productivity,

reducing direct workers' wages. But due to the lack of strict management, in 2019, the cost

increased, it was because the company changed its mechanism to recruit more employees to

join the company as well as the projects. The company mobilizes external workforce for large

projects and contracts, especially those in rural areas. With these projects, the company

mainly meets technical labor, most of which mobilize idle workers in rural areas, so the cost

is very low. But this is also a difficult problem for the company because the quality of labor

and the quality of the finished product deteriorates, sometimes destroying and going to work

causes even greater damage. However, the reduction of labor costs is not an achievement of

the company in labor management, because in the year factories still have to mobilize workers

to work overtime to meet the production demand. Meanwhile, there are time periods when

workers are idle and have no job to do, so the actual labor productivity of the factory in 2019

decreased compared to 2018.

4.2.1.2. General production cost:

As for general production costs: This cost is used for production activities in the

company and it is allocated separately to each production workshop, so we can consider the

following table:

Table 4.3. Analysis of production costs in the company

Unit: million VND

2018 2019
1. Raw materials 2.324,0 2.704,0
2. Staff expenses 1.602,0 1.071,0

28
 3. Depreciation of fixed assets 3.552,0 4.079,0

4. Service costs purchased 1.146,0 1.583,0

5. Other expense items 657,0 775,0

Total production costs 9.281,0 10.212,0

From the results in the table above, we can see that the production cost in 2019

increased 931.0 million VND compared to 2018, corresponding to an increase rate of 10%.

Therefore, the company has managed the usage expenses in the works and departments that

are not well managed.

The cost of materials in the works increased by 380.0 million VND, at 16.1% due to

the materials supplied to the sites that have not been directly checked, but only on the basis of

the supervisor after having the stock release paper materials, go to the warehouse to receive

materials and bring them to the construction works. On the other hand, the increase in this

cost is also due to the fluctuation of the market price in the past, making the material price

increase, which is an objective factor that cannot be avoided. The first reason for the increase

in raw material costs is that the prices of some corresponding input materials have increased

significantly. Such as iron, steel, cement, oil, electricity... However, if we ignore the above

objective factor, the increase in the cost of this item must include the subjective impact of the

company.

The decrease in staff cost is 531 million VND due to the decrease in salary

allowances of managers and departmental staff at the company last year. The company has re-

arranged the organizational structure of the department and reduced the number of employees

who regularly receive materials for production, which is combined with the workshop

statistics. The company has a regime to reduce a number of regimes on travel expenses and

meals for factory and department employees. Hence in 2019 the cost dropped to 33.1%.

Depreciation of fixed assets increased to 527 million VND, at the rate of 14.9% in

2019 compared to 2018, the reason is that some machines have been operating continuously

29
24/24 hours for production such as welding and cutting machines. Since the cost of using the

machine in the year is determined by the company as the depreciation rate of the fixed asset in

the year, this item is almost unchanged, and accounts for a small proportion in the structure of

expenses incurred in the year. Thus, the increase in production costs is partly due to the

increase in electricity prices, partly due to the poor management of raw materials costs used in

management and other costs purchased from outside. Moreover, the organizational and

technical level in construction is poor, so there are additional costs of surround and storage...

In addition, the loan must be payable because capital is occupied by the customer, the capital

is stagnant internal appropriations; investment projects that were difficult to recover many

years ago have not been fully resolved.

Service costs purchased from outside in 2019 compared with 2018 increased by 437

million dong, increased by 38.1% due to damaged lathes and corrugated iron so the company

had to buy from outside for repair. The increase in electricity and water prices of the state in

the past year is also the reason for the increase in the company's expenses.

Other expense items: Most of selling expenses, business management costs incurred in

the year are used to cover long-distance business trips, compensation expenses, guest

reception costs, management staff expenses. Therefore these expenses require the company to

be used effectively, which means weighing costs against the possibility of contracting or

additional revenue. In addition to expenses, the company has to spend some expense such as

gasoline, motorbike price increasing day by day.

Therefore, the reason for the low management of production costs of the company is

mainly due to increased production costs, which is a huge limitation in the organization of

production of G6 Engineering Consultants Company in general and of the other businesses in

particular. Especially, the management of materials in the company is very loose, causing

serious waste. Thus, to strive to increase profits in the coming years requires the company to

have many measures to manage costs in the production process.

30
4.2.1.3. General & administration expenses:

It is the expenses for the management apparatus of the enterprise, the expenses related

to the general operations of the enterprise such as the depreciation of fixed assets serving the

management apparatus, the cost of tools and tools, the expenses. Other fees incurred

throughout the enterprise such as salaries and salary allowances paid to staff of management

departments, costs of raw materials, office supplies, taxes, fees, insurance, expenses service

fees purchased from outside the office and the cost of provision for devaluation, inventory,

provision for bad debts, business trip expenses, transaction costs, external relations... in the

company, general and administration expenses is summarized as follows:

Table 4.4. General administration expense analysis table

Unit: million VND

2018 2019

1. Raw materials 523,0 295,0

2. Staff expenses 2.513,0 2.342,0
3. Cost of depreciation of fixed assets 1.073,0 1.258,0
4. Taxes, fees, interest expenses 750,0 860,0
5. Costs for conferences, reception, and transaction 510,0 790,0

6. Other expenses (electricity, water, telephone cost…) 1.485,0 1.887,0

Total administrative expenses 6.854,0 7.432,0

The data in the table above shows that the administrative expenses of the company in

2019 increased compared to 2018 by 578.0 million VND, corresponding to an increase of

8.4% with the turnover achieved. This increase is due to the increase in other cash expenses,

tax costs, fees, interest expenses, conference fees, guest reception, and transactions also

increased. But besides that, costs of materials, management staff costs, and depreciation of

fixed assets are reduced.

The cost of materials and tools in 2019 decreased by 228.0 million VND, the rate of

43.6% compared to 2018 because the company in the year reduced the number of materials,

31
stationery and specialized tools in construction and installation, reducing conference costs,

receiving guests, and transaction.

The cost of the management staff is reduced by 6.9% because the company has closely

arranged the organizational work in the departments, implementing the working regime of 40

hours/week, according to shifts. The company's apparatus has been adjusted and somewhat

reduced, more flexible than before.

Decreased depreciation costs of fixed assets because the departments do not have new

computer systems as in previous years, so the depreciation is negligible. On the other hand,

fixed items such as tables, chairs, and document cabinets were also not renovated, so this cost

decreased in 2019 by VND 185.0 million, a rate of decrease of 17.3%.

Expenses for services purchased from outside: Tax, fee, interest expenses increased

by 110.0 million VND. Expenses for conferences, receptions, and transactions increased by

280.0 million VND. In addition, the cost of buying from outside the company includes many

items, including the cost of electricity, water, telephone... used for production and the

management department of the company increased by 402 million VND, These expenses are

still wasted and used without a sense of saving.

4.2.2. Evaluating the cost management at G6 Engineering Consultants Company Limited

4.2.2.1. Advantages and disadvantages of the cost management at G6 Engineering

Consultants Company Limited

* Advantages:

First of all, it must be striving to promote the consumption of products and goods in

sales. Especially, creating confidence for the corporation and customers, which will help the

company in the coming time more favorable in signing contracts. At the same time, it also

proves that the company has autonomy in finding customers, especially investment direction

for products. The team of unified company officials agreed to have experience in production.

32
 Second, with the direction of in-depth investment, gradually improving production

capacity is also the right direction, although not promoting efficiency in the past year, but is a

fulcrum to improve profits in the coming years. Simultaneously with the above capital

management situation proves that the company has made many positive innovations in capital

management.

* Disadvantages:

Besides the advantages in 2019, the company also has some shortcomings that need to

be overcome. Inadequacies in the production process for a long time have not been resolved,

leading to a high production cost of the company, and a large amount of waste, resulting in a

large product cost. Especially in raw material cost management is the main reason why the

company's profit is not commensurate with its potential.

4.2.2.2. The impact of the cost on the business performance

Table 4.5. The result of business activities in the period from 2017 to 2019

Unit: million VND

2017 2018 2019

1. Revenue 133.520 142.583 158.089
2. Total expenses 128.524 135.551 152.653
3. Profit 4.996 7.032 5.436
Profits are the end result of production and business activities. The higher the profit,

the more businesses assert themselves their position and existence in the market economy.

When revenue increases, costs may increase but slow growth leads to lower cost

ratios.

If the labor productivity of enterprises increases, businesses will save living labor, or

save wages. At the same time, increasing labor productivity will have conditions to increase

employee income, but the cost of wages will have to increase slower than the growth rate of

labor productivity, so that is reasonable and cost savings.

33
 However, if it is only through high or low profits that the business earned during the

period to evaluate the quality of good or bad business operations, it sometimes leads us to the

wrong conclusion, because these profits are not commensurate with the amount of costs spent

and the amount of assets that the business has used. For example, the investment in

machinery, equipment and tools in a certain period will increase the costs of the business.

However, the appropriate investment with the role of improving service quality will attract

customers quickly and thus will promote the effect of the investment.

Therefore, the cost increasing is not necessarily a bad thing for businesses. When costs

increase, revenue and profit increase clearly shows the development and expansion of the

company's business.

4.2.2.3. Development direction of the company in 2021

With the successful momentum that the company has gained over the past year, to

increasingly consolidate its foothold in the market and improve the company's production and

increase the value of the G6 brand. Based on the orientation of G6 Engineering Consultants

Company until 2025, based on the market demand, the company plans to develop a

production and business plan for 2021.

In 2021, the company's production and business faced the following main difficulties:

The price of materials of all kinds increases suddenly such as: iron, steel, plastic...

affecting the implementation of economic activities and the implementation of production and

business. In addition, Covid-19 pandemic also affects the revenue of some enterprises.

* Business direction in the coming year:

The company sets production and business targets in 2021: revenue is 130 billion

VND. With such high strives, it is required that the company must take practical measures to

achieve the best results.

34
 Any business, in order to survive and carry out production and business activities,

must spend expenses. As a business operating in production and business activities, the cost

structure is often unstable between periods. In addition, under the strict direction of the

director, there are a few points in the cost structure to calculate the costs of the company and

should strive for in the coming year:

 Maintain and develop products suitable to the capacity of machines, equipment,

workers and markets.

 Participate in construction bidding in the area.

 Develop commercial business and other business activities.

 Bring into full play the dynamism and creativity of many individuals and units in

business activities.

 Actively solve problems in debt payment, advance...

 Implement cost saving measures to lower product prices, increase market

competitiveness and ensure business efficiency.

4.2.3. Some solutions to improve the cost management for G6 Engineering Consultants

Company Limited

First: Strictly managing materials.

Due to the changes in the unit price of raw materials, the costs of storage, handling

and transportation also increase, affecting the cost of the product, the company needs to take

specific measures such as: finding the market in which the materials are available the relation

between supply is greater than demand, the price will be more reasonable. On the other hand,

the company also needs to research the purchasing method, payment method, transportation,

loading and unloading... in accordance with the lowest possible cost. However, the right price

must go hand in hand with high quality. There is a new way to ensure the construction quality

with high quality standards at low cost.

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 Because the direct material cost item accounts for a large proportion of the total

production cost of the company, the company still uses it wastefully for many years, not only

reducing the company's profit but also making reduce product competitiveness. If managing

this item well, the company's resources will grow stronger. Therefore, the need to strictly

manage this item, the most important and practical thing for the company to reduce costs in

the coming years. Especially in 2019, the proportion of additional construction and

installation projects increases, so the cost of raw materials used will increase, so this

requirement becomes more urgent:

While assigning contracts to each implementing unit, instead of assigning the price of

the entire contract to the implementing units, detailing each specific cost item in both value

and quantity of each cost item as shown in the contract's cost estimate. After settlement, each

contract, the company must compare each actual cost item with the plan of each contract,

determine the cause of profit and loss, and the implementing unit must explain the costs

arising.

Establishing a product quality inspection department, in which a part specializes in

checking the quality of raw materials' inputs. In order to overcome the management of raw

materials while being put into use, it is often damaged and consumes more than expected. For

example, welding electrodes are of good quality, use longer than poor quality electrodes. This

is not only the basis for creating a good product but also solves cases where it is not

guaranteed to be dismantled. At the same time, this also reduces travel and transportation

costs during the purchase process.

Manage inventory of raw materials must be strictly from the import, storage, and

export stages, to avoid material exchange. When leaving or entering the warehouse, it is

necessary to present relevant documents, when bringing the materials out of the warehouse,

there must be a release note or the export order of the construction team leader. To do this, the

company must assign responsibility to each specific subject for the preservation of materials
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in each specific stage. In particular, when leaving the warehouse, there must be a written

request for release of the authorized person (usually the director of the business), specifying

the specific quantity and type to ensure compliance with the technical norms of each suit

copper.

Price control in the current unusual volatile conditions is still facing many difficulties.

It is necessary to establish inspection teams to patrol the market regularly. Building a

marketing team in addition to advertising the company's brand is also responsible for

penetrating the market to detect fluctuations and must have a regular report to the company

every week, every month…

For construction projects in remote and rural areas, because the company has not had

any appropriate measures to manage this expense item, in addition, the workforce is working

on the projects. It is mostly outsourced, so it is not conscious to protect the company's assets,

resulting in loss. Therefore, the company must increase the sending of engineers to the site to

supervise and administer the work. Besides, it is necessary to send a team of skilled workers

to the works, in addition to operating the work they can also supervise, watch and remind

some outsourced workers. Establish a construction protection division tasked with protecting

construction materials, equipment, machinery and tools and tools. Make sure to comply with

the regulations at the company as well as the regulations at the site.

In addition, the company should have policies to encourage and promote creative ideas

for contracts that comply well with the regulations on production costs according to the rate of

completion. This will encourage the workers to be more accountable for their work.

Second: Having a capital investment plan to renovate machinery and equipment.

Expanding production scale, buying new machinery and equipment is indispensable

for the company. Currently, machinery and equipment at the company are in use. But due to

the production and construction characteristics of large projects, but the construction time is

37
continuous and long, so machinery and specialized vehicles must work continuously, if there

is no plan to renovate, it will be a few years also worn out.

Therefore, the investment in renovating machinery and equipment, applying modern

technology to replace old machines and technology is an inevitable measure in corporate

governance. The replacement of modern machinery and technology will significantly reduce

the consumption of raw materials, increase labor productivity, and reduce production costs.

Third: Promoting the role of finance in checking and monitoring cost usage,

especially depreciation expense and other monetary expenses.

To expand production and business activities, the company's fixed assets should be

focused on innovation. Although it has not yet been rebuilt, it should be upgraded gradually to

ensure that the construction works, machinery systems, transport vehicles and cranes are

invested. This is a favorable condition for the company to contribute to saving raw material

costs, electricity costs and labor costs, facilitating lower production costs, improving

competitiveness with companies or contractors in the same industry.

Besides, the expenses purchased from outside at the company include many items, of

which mainly the cost of electricity, water, telephone... used for production and the

management department of the company. These expenses are still wasted and used without a

sense of saving. Therefore, the company needs to raise awareness for each worker to reduce

these costs. The company should organize the dissemination of responsible use of company

assets by using electricity and water in an economical manner and take measures to deal with

cases of use of corporate phones on personal things...

Fourth: Increasing implementation of new projects.

With a consumption plan in 2021 set with revenue of 130 billion (VND), most of it is

an increase in construction projects of bridges, roads, houses, schools... This indicator can be

improved if it knows how to make use of its production resources with the following

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implementation directions: Instead of only doing construction of 5 to 6 projects at a time, the

company can increase more workers split works to speed production and contract costs while

bringing in more projects.

The company should strengthen the establishment of a marketing system as well as

promote products on the mass media such as radio, newspapers, and leaflets. Especially

should open a separate website to link consumer markets everywhere. Moreover, the company

can also hire a broker to improve the ability to sign contracts. Take measures to encourage

organizations and individuals inside and outside the company to act as brokers in the sale of

products by deducting the commission rate for each contract value for the company brokers.

To be more proactive in price policy, depending on their production capacity, they can

set prices lower than planned but must ensure profit. If the price is too high, making it

difficult to sell, the company should use other after-sales services to attract customers.

Expand consumption markets across the country and strengthen the signing of large

contracts with key provinces. To do this requires the company to have measures to survey

market needs, product characteristics, and prices in these areas by the staff of the company or

hiring experts. In particular, improve the capabilities and functions of the Marketing

Department in understanding and evaluating the market.

Fifth: Improving product quality.

Well-organized production in enterprises, this is a necessary condition for products to

be more complete:

Each project has a production team leader who manages working days, hours as well

as the quality of work done by workers in shifts. Since then at the end of the month or quarter,

there will be specific reward measures to each individual.

Increasing the proportion of machines instead of direct labor to improve the accuracy

and durability of products as well as improve labor productivity.

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 Applying the new quality management system, bringing the ISO 9000 management

system into product quality management. Therefore, it is required that the company's product

quality control department must be more active in managing the quality of inputs and outputs

of products.

Improving the skills of workers:

 Regularly training and retraining the contingent of workers.

 Organize sightseeing, study, at units of the same industry.

 Hire experts to train, introduce and guide the use of new techniques.

 Organize competitions of good skills from team and team levels to discover typical

factors contributing to improving skills and accumulating experience for workers.

 Organize rank-holding contests before promotion.

 In the process of production and business, regularly create conditions for workers to

promote initiatives and, in addition, improve the quality of life for employees in both health

and spiritual life.

Along with improving product quality, the company also differentiates its products

from other products: design, delivery speed, reliability and perfection of product information,

creating peace of mind for users.

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 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

5.1. Conclusions

Cost management is a very important and necessary content in the business

management system, contributing to asserting the accounting system's function of providing

information in management, as well as helping businesses. Good goal of maximizing your

profits. The cost management at G6 Engineering Consultants Company are still very limited,

so finding out and offering solutions completing cost management in this enterprise is very

necessary, this is not only necessary in each enterprise but also a common problem of most

businesses in Vietnam today.

On the basis of research, synthesis, analysis, both in theory as well as in practice, the

thesis has solved some of the following contents:

Firstly, systematizes the basic theories about cost management as a premise for

assessing the current situation and finding solutions to overcome the problems of cost

management at G6 Engineering Consultants Company Limited.

Secondly, reflecting the actual cost management of G6 Engineering Consultants

Company Limited, from which realizes the positive points, the limitations that need to be

improved and the solution to overcome those limitations.

Third, in order to complete the cost management at G6 Engineering Consultants

Company Limited, the thesis has proposed solutions: managing materials, renovating machine

and equipment, monitoring expenses usage, increasing implementation of new projects and

improving the product quality.

The thesis has met the research objective. However, due to the limited time as well as

the limited knowledge, the work cannot avoid many shortcomings, looking forward to

receiving the comments of the teachers and the company leaders to make the topic more

complete.

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 The topic just stops at understanding cost management at G6 Engineering Consultants

Company. However, the cost management work has only been mentioned recently and is still

quite new to Vietnamese businesses; the implementation of cost management still faces many

difficulties and solutions completing cost management at the unit drawn from theoretical and

practical research. This is a broad and complex topic, the implementation time as well as the

practical approach is limited, so this article has not been able to thoroughly solve all

problems. In the future, if given favorable conditions, I would like to continue to research

more deeply in order to further improve the cost management at the company.

5.2. Recommendations

Whether the cost management is really effective or not is mainly due to the company's

own efforts and efforts to improve the organization of the cost management apparatus. To

achieve this, first of all, the company needs to have more closely directed and supervised by

the Director to departments, especially the accounting department in recording revenue and

expenses, but still ensure the accounting principles of caution without distorting the business

results of the business.

Fostering and improving the qualifications of employees to meet the company's

requirement of improving cost management. The company needs to further improve the

professional skills and qualifications of the accountants. Currently, the Ministry of Finance

has issued and changed many legal documents, requiring accountants to regularly update and

grasp information, guidelines and policies of the Ministry and the State.

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 REFERENCES

1. Quan Thi Phuong Dung (2019), “Cost management at Mining Company Limited – Dong

Bac Corporation”, MBA thesis, Hanoi.

2. Vu Quoc Duong (2017), “Cost and revenue accounting at Tran Anh Digital World Joint

Stock Company", MBA thesis, University of Commerce.

3. Nguyen Trong Binh (2018), “Completing cost and revenue accounting at AIC

commercial joint stock company'', MBA thesis, Hanoi.

4. Nguyen Thi Phuong Loan, “Cost management”. Available at: thuvien.due.udn.vn.

5. Ph.D. Huynh Loi and Ph.D. Nguyen Khac Tam, Cost Accounting, 2002

6. Documents provided by G6 Engineering Consultants Company Limited.

7. Some other theses.

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