Adoption Of Activity-based Costing Research Articles

Analysis of Determining Inpatient Room Rates Using the Activity-Based Costing Method in a Healthcare Setting

Background: Hospitalization rate determination is crucial for healthcare cost management, yet traditional methods often lead to cost distortions. Specific Background: Muhammadiyah Tuban Hospital has historically utilized conventional costing methods, which have resulted in higher than necessary charges for hospital services. Knowledge Gap: There is limited research comparing traditional costing methods with more accurate and modern approaches like Activity Based Costing (ABC) in the Indonesian healthcare context. Aim: This study aims to compare hospitalization rates at Muhammadiyah Tuban Hospital using traditional methods and the ABC method, to highlight discrepancies and propose a more accurate costing framework. Results: The ABC method yielded significantly lower hospitalization rates across various classes (VIP, Class 1, Class 2, and Class 3) compared to traditional methods. For instance, the ABC rate for the VIP class was IDR 270,619, compared to IDR 495,000 set by traditional methods. Novelty: This study introduces the application of ABC in an Indonesian hospital setting, providing a clear contrast in cost-efficiency against traditional costing. Implications: The findings suggest that adopting the ABC method can lead to more precise and lower hospitalization rates, potentially reducing healthcare costs for patients and improving financial management within hospitals.Highlights: Cost Accuracy: ABC method offers more precise hospitalization rates than traditional methods. Economic Impact: Adoption of ABC can lower patient costs and improve hospital financial management. Innovation: Introduces a modern costing method to Indonesian healthcare, suggesting a shift from outdated practices. Keywords: Activity Based Costing, Hospitalization Rates, Cost Management, Healthcare Economics

THE RECEPTIVENESS PUZZLE: UNDERSTANDING WHY SMALL FAMILY BUSINESSES STRUGGLE WITH ACTIVITY-BASED COSTING ADOPTION

This study examines the challenges associated with the adoption of activity-based costing (ABC) in a small family business in a less developed country. Through a case study of PT XYZ, a logistic company, the study found that technical factors, including unpredictable customer requests, varying duration of activities, and uncertainty around distance and fuel consumption for each truck, make adopting the ABC method challenging. Organizational factors, such as a top-down hierarchy and the negative perception of the owner affecting the rest of the hierarchy, also contribute to the non-acceptance of ABC. Additionally, key agents within the company did not demonstrate enthusiasm toward changes. The cultural and contextual factors and unique characteristics of small family businesses further make them less receptive to adopting new ideas or changes, including the ABC method. This study offers practical implications for introducing changes, such as improving data collection processes, establishing better communication channels with family business owners, and seeking external expertise or advice from professionals with experience in family business management. The study expands the current discussion on ABC implementation and contributes to the family business literature by linking family business characteristics with the adoption of the ABC method.

Modeling Emergent Variables to Assess the Adoption of Activity-Based Costing in Tanzania: The Application of Confirmatory Composite Analysis

Research Aims: The applications of composite models in explaining the adoption of innovations continue to gain widespread recognition in contemporary research. This study examines the role of a composite model comprising innovation attributes, contingency factors, and isomorphic pressures in explaining the adoption of activity-based costing (ABC) in Tanzania. The examined causal relationship between the model and ABC adoption is subject to mediation by behavioral preferences. More importantly, this study evaluates the overall fit of the model based on confirmatory composite analysis (CCA) as a prerequisite for path analysis.
 Design/methodology/approach: Data were collected from 188 manufacturing and service companies in Tanzania using a cross-sectional survey design. As part of CCA, the study employed principal component analysis (PCA) to form the three emergent variables namely innovation attributes, contingency factors and isomorphic pressures. It is these variables that were merged together to form the composite model whose influence on ABC adoption was analyzed based on partial least squares structural equation modeling (PLS-SEM).
 Research Findings: It was found out that, it is only normative beliefs that positively mediated the causal - relationship between the composite model and ABC adoption. This suggests that, the combined influences of internal and external factors defined by innovation attributes, contingency factors and isomorphic pressures towards ABC adoption is mediated by the belief that manufacturing and service companies should adopt the system. On the other hand, the perceptions of the system’s usefulness and ease to use do not play role in explaining the combined influences of factors on ABC adoption.
 Theoretical Contribution/Originality: The findings are paramount in creating the reference base for future studies as there were no previous studies of similar nature conducted to assess the impact of the composite model on ABC adoption.
 Keyword: Composite model, Innovation attributes, Contingency factors, Isomorphic pressures, Activity-based costing, Confirmatory composite analysis

Factors affecting the adoption of activity-based costing in a South African state university

Orientation: There is a lack of empirical studies regarding the adoption and implementation of the activity-based costing (ABC) system in South African state universities, despite its advantages.Research purpose: This study reports the perceptions on the factors influencing the adoption of ABC held by finance and academic staff at the Durban University of Technology (DUT), KwaZulu-Natal.Motivation for the study: The lack of empirical studies demanded understanding of those factors that influence the adoption of ABC at state-owned universities in South Africa. Therefore, this study examined the factors influencing the adoption of ABC in a South African state university using the DUT as a case study.Research approach/design and method: The study adopted a mixed research method conducted with 202 staff members: 129 academics, 41 heads of departments and 32 finance staff.Main findings: The positive factors influencing the adoption of ABC included the organisational strategy, information technology, decision usefulness of cost information, contextual orenvironmental factors and the organisational structure. However, the systems adaptability theme was considered a barrier to the adoption of ABC.Practical/managerial implications: The information could inform strategic initiatives related to the adoption and implementation of ABC in the university or similar state-funded universities.Contribution/value-add: The study provided an empirical understanding of the factors that would hinder and assist the adoption and execution of the ABC system.

Institutional Isomorphism and Adoption of Activity-Based Costing in Tanzanian Manufacturing Sector

This study aimed to ascertain the correlation between the three forces of institutional isomorphism and the adoption of different levels of activity-based costing (ABC) by manufacturing companies in Tanzania. A cross-sectional survey design was executed to collect the primary data from the three research areas: Dar es Salaam, Arusha, and Dodoma regions. The study employed the multinomial logistic regression model (MLRM) to analyse the quantitative data from a sample of 188 manufacturing companies. The analytical results show that only normative pressures positively correlated with level 2 of ABC adoption, while mimetic and coercive pressures positively correlated with level 3. Level 4 of ABC adoption positively correlated with mimetic pressures, while level 5 was found to correlate with coercive pressures only positively.

Innovation Attributes Composite and Adoption of Activity-Based Costing (ABC) in Tanzanian Manufacturing and Service Sectors: The Mediating Role of Behavioral Preferences

This study was conducted to explore barriers to ABC adoption in the Tanzanian manufacturing and service sectors, notwithstanding its superiority over the traditional costing system. It went further to suggest solutions to such barriers by evaluating the mediating role of behavioral preferences on the causal relationship between the innovation attributes composite and ABC adoption. Based on the cross-sectional survey design, primary data were collected from a sample of 188 companies located in the Dar es Salaam, Arusha and Dodoma regions. Partial least squares structural equation modeling (PLS-SEM) revealed that none of the behavioral preferences positively mediated the causal relationship between the innovation attributes composite and ABC adoption at level 1. At level 2, the findings show that, it was the mediating effect by the perceived usefulness ([Formula: see text], [Formula: see text]) only that was statistically significant. With the exception of the perceived ease of use, the mediating effects by perceived usefulness ([Formula: see text], [Formula: see text]) and normative beliefs ([Formula: see text], [Formula: see text]) were further confirmed to be statistically significant at level 3 of adoption. Moreover, the mediating effects by the perceived ease of use ([Formula: see text], [Formula: see text]) and normative beliefs ([Formula: see text], [Formula: see text]) were found to be statistically significant at level 4 of adoption. At the highest level 5 of ABC adoption, it was the normative belief ([Formula: see text], [Formula: see text]) only that positively mediated the causal relationship between the innovation attributes composite and ABC adoption.

PENGARUH PENERAPAN ACTIVITY BASED COSTING (ABC) TERHADAP MANAJEMEN BIAYA PRODUKSI, PRODUKTIVITAS PERUSAHAAN, DAN EFISIENSI PERUSAHAAN

<p align="justify">This study aims to analyze the influence of the implementation of activity-based costing (ABC) on the management of production costs, productivity and efficiency of the company. The research method used is qualitative with case studies in several manufacturing companies that have implemented the ABC system. Data collection is done through in-depth interviews with production managers, analysis of financial statements and direct observation of the production process. This study was conducted for 6 months, from January to June. The results show that the implementation of ABC has a significant impact on the company's production cost management. With ABC, companies can more accurately determine the cost of production for each activity involved, helping to make resource allocation decisions and control costs more accurately. Furthermore, the adoption of ABC is also associated with increasing the company's productivity. With a better understanding of production costs, companies can optimize production processes and improve overall operational efficiency. However, this study has some limitations, including limited case study and focus on qualitative data. The implication of this study is the importance of how companies view the implementation of ABC as a tool to improve cost management, productivity and operational efficiency in order to gain a competitive advantage. </p><p> </p><p><strong>Keywords</strong>: Activity Based Costing, Production Cost Management, Company Productivity, Company Efficiency </p>

The implementation of activity-based costing by a local government: an actor-network theory and trial of strength perspective

PurposeSome public sector organizations have decided to implement activity-based costing (ABC), a new cost calculation device and management accounting innovation initially designed for the private sector. The purpose of this study is to better understand the translation of this new calculation device in the context of a local government and to identify the trials of strength that actors faced during the implementation.Design/methodology/approachBuilding on actor-network theory and the concept of “trial of strength,” this study examines how a major change in a large local government’s structure, the merger of several cities, led to the adoption of ABC. This case study provides a setting for conducting a longitudinal analysis of the translation of a cost management innovation, ABC, in a public sector organization.FindingsThis study highlights how human and non-human actors interact when implementing a management accounting innovation in a local government and the trials of strength that they face. It also shows that although ABC helped the local government deal with issues such as setting fees, assessing outsourcing opportunities, increasing accountability and improving processes, the oversophistication of the technology used to implement the ABC model and the lack of links between the costing device and the budgeting process provoked a struggle among these two networks, leading actors to choose the budget over ABC.Originality/valueThis study’s findings extend the work on trials of strength of Christensen et al. (2019) and Laguecir et al. (2020). While those two studies focused on the struggles existing between opposing networks of human actors regarding the strategic orientation or the mission of public sector organizations, this study highlights that trials of strength may also occur when actors agree on the objectives of the new accounting innovation but not on how it is implemented.

The influence of the importance of cost information, product diversity and accountants’ participation on the activity-based costing adoption

PurposeThe purpose of this study is twofold. The first objective is to examine the impact of the importance of cost information and product diversity on the adoption of activity-based costing (ABC) by Kazakhstani poultry organizations. The second goal is to establish the moderating impact of accountants’ involvement in the design for the costing system on the relationship between product diversity and the adoption of the ABC system.Design/methodology/approachThe questionnaire was sent to all 58 poultry organizations in Kazakhstan and eventually, 43 completed questionnaires were collected, which is 74% of all Kazakhstani poultry organizations.FindingsThe results show that there is indeed a positive relationship between product diversity and ABC adoption when the level of diversity is used concurrently with accountants’ involvement in the design of product costing. In addition, product diversity was identified as a significant negative predictor of ABC adoption.Originality/valueThis study updates the literature on the rate of ABC adoption in a developing country like Kazakhstan, more specifically, in the poultry industry. It complements the understanding of the factors that influence the ABC adoption by taking a synergistic approach to factors such as product diversity and accountant involvement. At the same time, this study is one of the first empirical attempts to test the moderative role of the participation of accountants in the development of calculation systems in the ABC adoption.

The influences on Activity-Based Costing adoption as an optimal costing system design: Evidence from Saudi Arabia

Research Question: Under which conditions is the adoption of activity-based costing (ABC) beneficial to the business-unit and, hence, represents the optimal costing system design (CSD)? Motivation: Identifying the situations under which ABC is beneficial with regard to the performance of the business-unit and, thus, represents the optimal CSD is important in order to make a correct decision to invest in ABC. This necessitates the adoption of the matching form of fit when examining the relationship between the influential factors and ABC adoption as an optimal CSD due to its ability to reflect when ABC is beneficial and, therefore, indicate the optimal CSD. This study builds on Ittner et al. (2002) to examine this relationship from the standpoint of the matching form of fit, and also extends this line of research by examining the effect of the most key influential factors, using a sufficiently comprehensive multi-dimensional production complexity (PC) measure. Idea: This paper examines the role of the key influential factors on ABC adoption as an optimal CSD from the standpoint of the matching form of fit, using a sufficiently comprehensive multi-dimensional PC measure. Data: The data were collected from 200 Saudi manufacturing business-units. Tools: The questionnaire survey strategy was used to collect the data, which were then analysed using the residual analysis (RA) technique. Findings: Unexpectedly, the results of the RA showed that none of the examined key factors of competition, indirect costs, PC and information technology quality (IT quality) affects ABC adoption as an optimal CSD from the viewpoint of the matching form of fit. Contribution: This research contributes to the ABC adoption research by examining the situations under which ABC is beneficial and, hence, represents the optimal CSD through examining the impact of the key influential factors on ABC adoption as an optimal CSD from the standpoint of the matching form of fit.

Factors affecting the adoption of activity-based costing at technical and vocational education and training colleges in KwaZulu-Natal, South Africa

Orientation: It is impossible to accurately determine the detailed costs of running courses offered at South African technical and vocational education and training (TVET) colleges, as none of them practises activity-based costing (ABC). The perceptions and knowledge of their finance staff regarding ABC adoption are unknown, making it impossible also to know their reasons for non-adoption.Research purpose: This article reports the awareness of and attitudes towards ABC held by finance staff at six TVET colleges in KwaZulu-Natal and proposes a novel model for its successful adoption.Motivation for the study: The lack of empirical studies demanded understanding of those factors that address ABC adoption at South African public TVET colleges. This study therefore assessed finance staff members’ perceptions of those factors that would support the introduction of this costing system.Research approach/design and method: This study ascertained these opinions and knowledge by surveying 30 members of the finance staff at six TVET colleges using a questionnaire.Main findings: The study’s population perceived that lack of top management support, the colleges’ cost structure and technical factors are barriers to the implementation of ABC in their institutions.Practical/managerial implications: South African public colleges should address those obstructing factors as the successful adoption of ABC will facilitate the accurate calculation of their operational costs.Contribution/value-add: The study identifies those factors that would facilitate the adoption of ABC and proposes a model that would assist in the implementation of this costing system in South African public colleges.

Research Review on Activity-Based Costing System (ABC): ABC's Development, Applications, Challenges, and Benefits

Management accounting continues to be useful for business, and one of its tools is Activity-Based Costing (ABC). This paper is a thematic research review on the ABC System, its development, applications, challenges, and benefits. Several researchers claim that ABC is efficient in product pricing, cost-cutting strategy, and customer and profitability analysis. Meanwhile, Time-Driven ABC was introduced with the advantages of firm-wide application and lower costs. Several academicians argue that TDABC can be useful in the simulation of the optimal resource allocation, benchmarking, Balanced Scorecard and Total Quality Management. For both American and British companies, researchers attributed a highly significant correlation between overall ABC success and the purpose ‘Activity Performance Measurement and Improvement.’ According to practitioners, ABC adoption has an important consequence, i.e. it reinstated the relevance of management accounting. However, based on adoption rates in the U.K. and the U.S.A., few companies adopt ABC. Challenges faced by companies in the implementation are the possible reasons. Researchers cited the huge costs and technical complexity as the system’s predominant challenges. This paper synthesized the researchers’ conclusions into two unifying hypotheses on factors correlated to ABC adoption and success.

An Analysis of Activity Based Costing Practices in Selected Manufacturing Units in India

This study was an attempt to analyze the motives for implementation and causes for non implementation of activity based costing (ABC) system and to establish the relationship between the company characteristics and use of the ABC system in selected manufacturing units in India. The study targeted medium and large scale companies having at least 100 employees and a minimum investment of Rs. 5 crores in plant and machinery. Logistic regression and descriptive statistics were performed to analyze the data through SPSS. The study found a number of employees and the percentage of overheads as significant company characteristic factors for the implementation of the ABC system. More adequate pricing decisions, better overhead cost allocation, and more accurate product cost were found as the motives for the implementation of the ABC system. The major challenges faced during the adoption process of the ABC system are selecting cost drivers, high cost of ABC, data collection difficulties, and uncertainty of ABC benefits. Costly to switch to ABC, easy to track cost, satisfied with current system, and uncertainty of ABC benefits were found as the main causes for non adoption of ABC. The study recommended the implementation of the ABC system to get the various benefits associated with it.

INTEGRATING ABC AND EVA TO EVALUATE INVESTMENT DECISIONS

The significance of investment is transparent in the world of competitive business. Traditional costing systems in which their emphasizes are for short term savings rather than long term benefits have shown some lacking in providing accurate and reliable cost data for the investment decisions. Activity-based Costing (ABC), which is developed to satisfy some of the weaknesses of the traditional costing systems, can provide valuable insights into the operating processes and come up with more accurate cost data. In this paper, ABC is used to provide significant information for investment decisions. Although, the ABC method provides accurate operating product costs, it does not identify which products are economic valued added creators and so contribute to companies’ wealth. This drawback can be overcome by applying Economic Value Added (EVA). The adoption of ABC and EVA can represent a considerable change in the managerial thinking and to corporate strategies and business performance.

The adoption of Activity-Based Costing in private health care facilities in South Africa

The implementation of a South African National Health Insurance, combined with the potential of price reforms, has the potential to adversely affect the profitability of the health care industry. This could force management to look at ways to better understand the causal link between costs and the activities that drive costs. The study aimed to determine the extent of ABC use in health care facilities in South Africa, what the perceived and actual benefits are of adopting ABC and what other management tools and techniques are considered important. A structured questionnaire was sent to a target population, to which 51% of recipients responded. The results revealed that the rate of ABC adoptions has increased from 1.2% in 1994 to approximately 46% today. The growth in ABC adoptions and the high level of ABC adoption in relation to hospitals in the USA and Ireland indicate that the hospital industry in South Africa acknowledges the value ABC can add.

Activity-Based Costing: A Synthesis of Findings on Its Adoption and Implementation

The paper reviews the literature on the adoption and implementation (A&I) process of activity-based costing (ABC). The paper finds that the majority of the studies have tried to identify technical, behavioral, organizational and other contextual factors that result in the adoption and successful implementation of ABC. However, findings have been inconclusive and only found few specific factors for instance top management support, implementation training, non-accounting ownership and business size, to be associated with a successful process. Only few studies challenge the well-behaved adoption and implementation process assumed in the factor studies, as the process actually includes legitimization issues, power struggles among individuals and pressure from certain institutions. To advance the research within the adoption & implementation of ABC, a future research agenda is proposed. This includes a request for research within new geographical regions and organizational sizes, a demand for a new research framework in contingency-theory related factor studies and a call for research within alternative management accounting research perspectives to illustrate the complexity of the adoption & implementation process.

THE ADOPTION AND IMPLEMENTATION OF ACTIVITY-BASED COSTING: A SYSTEMATIC LITERATURE REVIEW

ABSTRACT The paper reviews the literature on the adoption and implementation (A&I) process of activity-based costing (ABC). The paper finds that the majority of the studies have tried to identify technical, behavioral, organizational and other contextual factors that result in the adoption and successful implementation of ABC. However, findings have been inconclusive and only found few specific factors for instance top management support, implementation training, non-accounting ownership and business size, to be associated with a successful process. Only few studies challenge the well-behaved adoption and implementation process assumed in the factor studies, as the process actually includes legitimization issues, power struggles among individuals and pressure from certain institutions. To advance the research within the adoption & implementation of ABC, a future research agenda is proposed.This includes a request for research within new geographical regions and organizational sizes, a demand for a new research framework in contingency-theory related factor studies and a call for research within alternative management accounting research perspectives to illustrate the complexity of the adoption & implementation process. Keywords implementation, activity-based costing

Adoption of Activity-Based Costing: A Survey of the Education Sector of Greece

The need to invest in education becomes evident during difficult economic periods. Nevertheless, the lack of sufficient financial resources leads educational institutes to form competitive cost strategies. Despite the increasing competition in the education sector, educational institutes usually refrain from using complex cost methods to improve their operations. In this study, we chose the activity-based costing (ABC) method to understand the reaction of educational institutes when they are confronted by the implementation of innovative cost methods. An institute willing to implement ABC should be capable of comprehending the associated operational adjustments. This study investigates the education sector’s potential in adapting to the ABC method to improve cost management. Additionally, factors that prevent educational institutes from making cost strategy reforms were also observed. Initially, we conducted semi-structured interviews of experts to develop our research instrument. The survey was then applied to 152 educational institutes located in the seven most populous regions of Greece. The findings of the hierarchical regression analysis indicate that educational institutes are not capable of accurately allocating costs and they lack specific data concerning overheads. However, the sector is more eager to implement sophisticated methods for increasing competitiveness than was anticipated.

Reasons for not changing to activity-based costing: a survey of Irish firms

Purpose This paper aims to report on a survey of medium and large Irish firms to ascertain reasons for not changing to more advanced costing techniques, namely, activity-based costing (ABC). Developments in technology and recent poor economic conditions would suggest that the technique could be adopted more by firms, as they make increased efforts to keep costs under control. Design/methodology/approach A survey instrument was used to gather data drawing from the top 1,000 Irish firms. From a useable population of 821 organisations, a response rate of 20.75 per cent was achieved. Findings Findings show a rate of adoption of ABC of 18.7 per cent, which is lower than previous studies in an Irish context. The level of information technology in firms is not a key factor for non-adoption. Instead, the main reasoning for non-adoption revolve around stable existing costing methods, which firms expressed satisfaction with. Originality/value This research suggests the adoption of ABC is not necessarily driven by external factors such as technology and economic shocks, at least in the context of Ireland. It also suggests that costing techniques may be deeply embedded within organisations and are less likely to be subject to change.

Attributes of Innovation and Management Accounting Changes

This study provides evidence for the adoption and diffusion of activity-based costing (ABC) in the Sultanate of Oman (as a developing country) and examines the significance of the effect of characteristics of innovation on the adoption and diffusion of ABC (as both a practice and a process). It further explains some of the variations in the ABC’s adoption rates in the literature. The findings show that the adoption and diffusion of ABC in Oman is not very popular. The results provide no conclusive evidence to support the significance of innovation characteristics on the adoption and diffusion of ABC in developing countries, such as Oman. While the diffusion of innovation theory suggests that innovation characteristics could have a significant influence on the adoption and diffusion of innovations, current study suggests that the diffusion of certain innovations (such as ABC in our study) in a particular environment and situation (such as developing countries-case of Oman in our study) could follow other ideologies (e.g., fad fashion philosophy or institutional theory) rather than the diffusion of innovation theory. Keywords: Activity-Based Costing, Innovation Characteristics, The Diffusion of Innovation and Economic Theory To cite this document: Davood Askarany, Attributes of Innovation and Management Accounting Changes, Contemporary Management Research, Vol.12, No.4, pp. 455-466, 2016. Permanent link to this document: http://dx.doi.org/10.7903/cmr.1144