Implementation of activity based costing in Malaysia

Abstract

PurposeThe study aims to document and highlight the problems and benefits of implementing activity‐based costing (ABC) in two companies in Malaysia.Design/methodology/approachA case study methodology was used to describe the process of ABC implementation in a Malaysian based multinational company as well as a Malaysian multinational company.FindingsAlthough ABC is not widely adopted by companies in Malaysia, it is recognized as a valuable tool to improve the performance of these two companies. Additionally, many of the problems that hinder the implementation of ABC are related to managerial factors rather than the technical aspects of the tool itself. Several factors are pertinent to ensure the success of ABC: top management support, simplifying the ABC implementation process, sourcing suitable ABC software, and finally, ensuring that all affected employees understand and actively support the implementation process.Originality/valueThe findings have significant implications for companies that want to embark on ABC. The problems highlighted may help companies planning to adopt ABC in the near future to better address these issues.