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monitor without needing to be constantly present at the factory, proactively tracking and
managing production progress, saving time and effort, improving management efficiency;
optimizing production processes, minimizing the amount of defective goods, promptly
detecting and correcting problems, improving product quality; and increasing work
efficiency.
Given the above characteristics, applying the ABC model to Vietnamese textile and
garment businesses in the digital economy is entirely appropriate, especially for large
enterprises that are implementing digitalization.
3.2.2. ABC models for Vietnamese textile and garment businesses
a. Traditional ABC model
In the traditional ABC model, after identifying the business activities, indirect costs
are allocated to the activities (or activity centers) based on resource allocation criteria.
These costs are then allocated, or traced back, from the combination of operating costs to
products and services according to the demand ratio of each activity and each product.
Steps to implement the traditional ABC model
Step 1: Identifying direct costs (direct material costs, direct labor costs)
Step 2: Identifying activities that generate indirect costs is a fundamental issue in
ABC (Average Costing). Each activity or group of activities typically includes costs that
share a common source (cost driver). Therefore, identifying these activities depends on
the specific production and business characteristics as well as the technological processes
of each enterprise, leading to activities that generate different indirect costs. In the textile
industry, these activities typically include those related to machinery use, product
inspection, fuel, energy, and premises.
Step 3: Identify indirect costs and aggregate them for each activity. Each activity
requires the aggregation of separate costs into a detailed operating cost account.
Step 4: Determine the cost allocation criteria for each activity. When determining
the cost allocation criteria for activities, ensure that these criteria are closely related to
that activity.
Step 5: Measure and determine the cost of the activities. Determine the cost for
each activity based on the allocation of indirect costs to each operating unit according to
the criteria identified in Step 4 and the results of measuring the total allocation criteria of
the activity.
Step 6: Determine the cost of products and services. After collecting and calculating
the overhead costs for each activity, the accountant proceeds to allocate the overhead
costs of the activities to the products and services.
b. ABC model using the EAD matrix.
The traditional ABC model faces several obstacles during its implementation,
including a lack of data and insufficient technical, financial, and IT resources. The
information needed to operate and implement the traditional ABC model is very
expensive, especially for small and medium-sized enterprises (SMEs) in Vietnam, which
account for a large proportion of the textile and garment industry and often face financial
constraints. These businesses need to be very selective in using data and analysis to
determine total production costs.
The ABC model using the EAD matrix is ​ ​ an efficient and cost-effective model,
very suitable for SMEs. This model provides accurate cost information for decision-makers
to build company strategy, determine product costs, and improve cost structure. In this
model, activities are grouped into activity categories to ensure an excessive number of

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