Adoption Of Activity-based Costing Research Articles

The Impact of Non-Accounting Ownership and Top Management Support on (ABC) Adoption among Service Companies in Jordan: Proposed Conceptual Framework

Accurate costing information is crucial for services businesses and information for strategic decision, to maintain a competitive advantage over its competitor's Traditional costing system leads to cost information distortion ,therefor the management of these businesses to Activity Based Costing (ABC) was introduced to address the shortcomings of traditional volume-based costing system. Prior research in developed countries showed impact adoption of ABC for many of companies for different sectors However in developing countries there are shortage in these studies. In order to achieve the high degree of adopting ABC in developing countries. This paper proposes a conceptual framework to investigate the factors influences on the success of ABC through non-accounting ownership, top management and ABC adoption among Service Companies listed on the Amman Stock Exchange (ASE).

Activity-Based Costing Diffusion, Strategy and Organizational Performance: Evidence from Iran

While management accounting literature has shown substantial evidence on ABC adoption and implementation within the Western context, this study attempted to provide some insight into the ABC diffusion stages within the Iranian context. Using a revised four-stage model in measuring activity-based costing (ABC) diffusion, this study examines the performance consequence of ABC diffusion together with its relationship with Miles and Snow (1978) strategic types. From purposeful sampling of manufacturing companies listed in the Tehran Stock Exchange, a total of 400 survey questionnaires sent to these companies where 300 usable completed questionnaires were returned and analysed. Hypotheses were tested using ordinal logistic regression and ANOVA analyses. The results showed that firms at higher ABC diffusion stages have better levels of organizational performance than firms at the lower ABC diffusion stages. In addition, the analyzer strategy was a significant factor in determining a firm’s decision to go to higher ABC diffusion stages.

The influence of technological and environmental factors on the diffusion of activity-based costing in Iran

The study investigates the different relationships between certain technological and environmental factors and activity-based costing (ABC) diffusion stages. Data were collected through a survey questionnaire sent to Chief Financial Officer of Iranian manufacturing companies. Based on binary logistic regression models, the results show that the relationships between the antecedent factors and ABC diffusion change depending on the diffusion stages. The overall findings suggest that factors that are significantly related to one of ABC diffusion stages (e.g., ABC adoption stage) may not relate to other ABC diffusion stages (e.g., ABC infusion stage). For instance, product diversity and analyzer strategy produce different level of effects on different ABC diffusion stages. The results also reveal that uncertainty-financial and uncertainty-industrial influence two of the ABC diffusion stages, while uncertainty-economical, overheads, and competition influence only one of the ABC diffusion stages.

The real option approach to adoption or discontinuation of a management accounting innovation: the case of activity-based costing

This paper employs the real option approach (ROA) to study the investment decision of a management accounting innovation—the case of activity-based costing (ABC)—adoption or discontinuation under uncertainty. We argue that investing in ABC is analogous to having the option rights in a financial (American) call option. We propose a model taking the firm’s total annual production as primary decision variable and using the added annual net profits after establishing ABC to identify the optimal threshold for adoption or discontinuation. We find that the optimal adoption (resp., discontinuation) threshold is higher (resp., lower) when obtained by the ROA than by the net present value (NPV) method; thus, the ROA is more conservative than the NPV approach. Their difference stems mainly from the ROA’s option value of delay before implementing the adoption/discontinuation decision. Further, recent empirical researches based on survey found inconclusive results about the adoption of ABC. For instance, there are studies found that manufacturing sector having a higher adoption rate of ABC than non-manufacturing sector, but the other studies find the opposite. Our theoretical model explains the inconclusive results from the empirical researches can be driven by the variations in mean and volatility of sectoral output growth, which are omitted in those studies.

A framework for assessing cost management system changes: the case of activity-based costing implementation at food industry

Article history: Received October 28, 2014 Received in revised format 15 January 2015 Accepted 28 January 2015 Available online January 31 2015 An opportunity to investigate the technical and organizational effect of management accounting system changes has appeared with companies' adoption of activity-based costing (ABC). This paper presents an empirical investigation to study the effects of ABC system for case study from food industry in Iran. From this case, the paper develops a framework for assessing ABC implementation and hypotheses about factors that influence implementation. The study detects five cost centers and for each cost center, it determines different cost drivers. The results of our survey has detected that implementation of ABC system not only helps precise allocation of overhead costs but also helps internal management companies for better planning and control of production, making better decisions for company's profits. Growing Science Ltd. All rights reserved. 5 © 201

Applications and Relevance of Activity Based Costing

As students of commerce, we have been dealing with the costing systems and their application in India. The domain knowledge of Costing Systems will help us gain insight into practices of Indian corporate sector for measuring and reporting performance of cost accounting. Despite of advancement in information technology and decision support systems, Indian firms predominantly use traditional costing systems like Absorption Costing and Standard Costing for performance management. This has resulted into inaccurate reporting of costs to management and thereby has resulted in lacunas in managerial control especially with respect to financial aspects. As an alternative, modern costing techniques such as ‘Activity Based Costing (ABC)’ provide a definite solution to this problem of inaccurate cost management. ABC has been successfully adopted by many multinational companies across the world. Unfortunately in last 20 years there has been a very slow progress in adoption of ABC in India. The rationale of this study is to identify financial performance and justification to adoption of ABC. This research will explore areas of concerns for Indian firms in their approach towards ABC as an organizational performance management tool. The significance of the study can be stated as it will bring out prospects, issues, performance and problems of adopting ABC in Indian context. This should help us in gaining knowledge about key factors that decide success of new costing system and the contributions it can make to the value of the company.

Lagging Effects of the Use of Activity‐Based Costing on the Financial Performance of Small Firms*

This paper contributes to the earlier small business literature by investigating the lagging effects of the use of activity‐based costing (ABC) on small firms' performance. Moreover, we examine if the small firms' past financial performance drives the adoption of ABC and explore whether the extent of ABC use leads, in turn, to improvements in firms' financial performance in the immediate future. In sum, the survey results indicate that small firms with adequate financial resources as well as firms experiencing declining growth tend to use ABC and such use facilitates their subsequent growth and profitability. Small firms seem to benefit from using ABC.

The Activity based Costing in Morocco : Adoption and Diffusion

The Activity Based Costing (ABC) represents a new model in the management accounting. In recent decades, it has been the subject of several research papers, especially in developed countries (USA, UK...). However, this type of work is still absent in Morocco. In this context, this article highlights the results of an empirical study on the ABC adoption in 62 enterprises based in Morocco. The study finds that the adoption rate of this method of the management accounting in Morocco is relatively high (12, 9%). It is 21.87% in large enterprises and 3.33% in SMEs. This rate is 14.58% in industrial firms and 7.14% in other enterprises.

An investigation into the mixed reported adoption rates for ABC: Evidence from Australia, New Zealand and the UK

An accumulated body of the literature confirms that the adoption of activity-based costing (ABC) can lead to a substantial improvement in organisational performance, productivity and profitability, and therefore encourages further adoption of the technique. However, studies investigating the diffusion of ABC have reported inconsistent and mixed results. This could cause uncertainty for many potential adopters of ABC (especially for those who follow the fashion and fads approaches) and influence their tendencies towards the adoption of ABC in the future. Addressing the diffusion process as a contextual factor, this study simultaneously investigates the adoption of ABC from the perspectives of different diffusion processes. Using two commonly adopted diffusion processes (the stages of adoption and the levels of adoption), this study examines the relationship between the reported adoption rates for ABC and the diffusion process approaches chosen to measure its adoption rates in three western countries: Australia, New Zealand and the UK. A similar questionnaire was used and more than 2000 qualified CIMA members (via a survey study and follow-up interviews) were targeted. The findings suggest a significant association between the reported adoption rates for ABC and the diffusion process approaches chosen to measure the adoption rates. The findings further suggest that the lack of a common understanding of ABC systems may have also contributed to the mixed reported adoption rates for ABC, as many ABC adopters have considered themselves adopters of traditional accounting systems by mistake (especially when they are dealing with ‘facility costs’ as one of the main cost hierarchies under ABC systems).

The relationship between product diversity, usage of advanced manufacturing technologies and activity-based costing adoption

This paper examines the associations between product diversity, usage of advanced manufacturing technologies (AMT) and activity-based costing (ABC) adoption. Theory strongly suggests that product diversity is a major determinant of the demand for ABC systems. To date, the results of empirical research on the relationship between product diversity and ABC adoption have generally been inconclusive, however, suggesting that there either may be no strong relationship, or that methodological issues may have prevented researchers from consistently finding it. Using a dataset of survey responses from 191 Dutch, medium-sized manufacturing firms, this paper re-examines the relationship between product diversity and ABC adoption. Improving upon the measurement of product diversity and distinguishing between ABC adoption and use, it examines whether the relationship is curvilinear (inverted U-shaped) and/or moderated by usage of AMT. The paper contributes to the literature by showing that, consistent with the underlying theory, product diversity, on average, is positively related to both ABC adoption and ABC use, but also that these relationships are indeed inverted U-shaped and that the relationship with ABC use is negatively moderated by usage of AMT.

The Adoption of ABC and the Improvement of Performance: The Case of the Central Bank of Morocco

The adoption of Activity-Based Costing (ABC) is motivated by the search for greater efficiency in the face of competitive pressures resulting from globalization, and particularly the introduction of high-quality and low-priced Asian-made products and services into the Moroccan markets. The search for greater efficiency through the application of ABC is still to be determined. The purpose of this paper is to examine the relations between ABC and performance, particularly on non financial performance. With this objective a field study was undertaken between 2007 and 2009 at the Central Bank of Morocco (Bank Al-Maghrib) to highlight the direct effects of ABC implementation on performance.

Supply chain management, activity-based costing and organisational factors

In today's intense global competition, supply chain management (SCM) is as a vital tool for helping managers to improve productivity, profitability and the performance of their organisations. In doing so, SCM requires more accurate cost data regarding all activities and processes within the organisations. Given the above, activity-based costing (ABC) can significantly contribute to global supply chain management as it is suggested to fulfil the above requirements by providing more accurate, detailed and up-to-date information on all activities and processes in organisations. Contributing to the SCM and ABC literature, current study first identifies different types of improvements which ABC can offer to SCM and the performance of the organisations, then it examines the extent of association between business size as well as business industry (as organisational factors) affecting the adoption of ABC in New Zealand (NZ) through using a survey questionnaire and targeting NZ qualified CIMA members. To improve SCM and organisations’ performance by increasing the adoption of ABC in organisations, one of the main implications of the findings is that the adoption of ABC in smaller firms needs more attention compared with the larger firms regardless of their industries (manufacturing versus non-manufacturing firms). However, when the decision is made to implement ABC, non-manufacturing firms (rather than manufacturing firms) need more attention to proceed with a higher level of adoption of ABC.

Le rôle des canaux de communication et des caractéristiques perçues de l'innovation dans le processus d'adoption de la comptabilité par activités (méthode ABC)

Résumé L’objectif de cet article est de mesurer le rôle des canaux de communication et des caractéristiques perçues de l’innovation dans le processus d’adoption organisationnel de l’ABC, ou comptabilité par activités. Il s’inscrit en cela dans le prolongement des études précédentes sur les déterminants de l’adoption de l’ABC. Deux étapes clés du processus d’adoption de l’innovation sont distinguées : la considération de l’adoption de l’ABC et son adoption éventuelle. Les résultats obtenus montrent que la perception de l’avantage relatif et celle de la comptabilité de l’ABC a un effet positif et significatif à la fois sur la probabilité de considérer l’adoption de cette dernière et sur la probabilité de l’adopter. La complexité perçue n’a en revanche aucun effet. Parmi les canaux de communication étudiés, seule l’utilisation des ouvrages de gestion et des conférences, colloques et séminaires sur l’ABC a un impact positif et significatif sur la probabilité de considérer l’adoption de l’ABC. En revanche, aucun canal de communication n’a d’effet sur la probabilité d’adopter l’ABC.

The role of manufacturing practices in mediating the impact of activity-based costing on plant performance

We study the impact of activity-based costing (ABC) on adoption of world-class manufacturing (WCM) practices and plant performance. In contrast to earlier research that estimates the direct impact of ABC on plant performance, we develop an alternative research model to study the role of world-class manufacturing practices as a mediator of the impact of ABC. Analysis of data from a large cross-sectional sample of US manufacturing plants indicates that ABC has no significant direct impact on plant performance, as measured by improvements in unit manufacturing costs, cycle time, and product quality. We find, however, that WCM practices completely mediate the positive impact of ABC on plant performance, and thus advanced manufacturing capabilities represent a critical missing link in understanding the overall impact of ABC. Our results provide a different conceptual lens to evaluate the relationship between ABC adoption and plant performance, and suggest that ABC adoption by itself does not improve plant performance.

Preliminary Findings on ABC Adoption in Canadian Hospitals: Reasons for Low Rates of Adoption

Activity based costing (ABC) can be traced to the years before the Second World War, but its popularity in recent years has been widespread following the Johnson and Kaplan (1987) article. Both teaching and practice have been impacted by the extensive research and literature in this area. However, it is evident that there has not yet been widespread successful implementation of ABC. Adoption rates have been lower than expected given the potential advantages of using ABC suggested by leading academics and professional organisations around the world. We found through initial surveys that there are low rates of adoption of ABC in hospitals in Ontario. Since hospitals are under severe budgetary pressures, have a high variety and complexity of cases and a high level of shared resources, we would expect more adoption of ABC. We use the approach suggested by Scapens (1990) to ascertain the determinants of this low level of adoption. Our studies focus on four hospitals in Ontario, Canada, using surveys and interviews. Our preliminary findings are that the application of social theory, as suggested by Scapens (1990), provides useful explanations for the low ABC adoption rates in hospital care in Canada.

The Association Between Activity-Based Costing System Adoption and Hospital Performance

This study explores the relation between activity-based costing (ABC) information use and four measures of hospital performance - profitability, revenue enhancement, cost containment, and societal commitment. Specifically, we address the issue of whether, relative to non-adopters, hospitals enhance revenues, reduce costs, increase profitability, and display a greater commitment to the community after the implementation of activity-based costing strategies. We further explore whether the adoption of ABC affects performance and utilization differently depending on ownership type (for profit, non-profit, or government). The empirical evidence suggests that activity-based costing procedures produced mixed results in the two ownership groups. The presence of an advanced cost management strategy in the for-profit sector was associated with increased profitability (return on beds). In contrast, activity-based costing procedures in the government/non-profit sector were associated with enhanced revenue-producing activities, such as increased inpatient admissions and outpatient visits. While no evidence of improved cost controls was uncovered, government/non-profit adopters maintained pre-adoption levels of direct medical care, while non-adopters reduced costs by eliminating value-adding medical personnel. Society does not appear to benefit, however, from the adoption of ABC in the government/non-profit sector through the purchase of larger amounts of productive assets or the provision of added amounts of charity care. Indeed, adopters and non-adopters, alike, displayed positive changes in their community involvement in the post-adoption period. To sum, healthcare providers in both sectors utilized advanced cost management strategies in different ways to adapt to adverse changes in their unique environments.

ABC: adopters, supporters, deniers and unawares

PurposeDespite the great interest in activity based costing (ABC), companies seem to be reluctant to adopt it. Our research aims at examining the rate of adoption of ABC by Greek companies that belong to all three sectors of the Greek economy, i.e. manufacturing, retail and services, as well as investigating the reasons that influence a firm's decision to change its current cost accounting system.Design/methodology/approachAn empirical survey via questionnaires was conducted during 2003 on a sample of 88 Greek leading companies and four company categories were identified in respect to their perceptions towards ABC (ABC adopters, ABC supporters, ABC deniers and ABC unawares).FindingsOur findings indicate that ABC diffusion in Greece is quite satisfactory. Furthermore, we present evidence that firms that have implemented ABC (ABC adopters) have experienced multidimensional management facilitating benefits from the system. However, the adequacy of resources was found to be the variable that is positively and statistically correlated with the majority of problems encountered during ABC implementation process. On the other hand, the companies that include ABC in their future plans (ABC supporters) seem to be familiar with the corresponding expected benefits and potential problems of its adoption. We present evidence that the possibility of future ABC adoption is related to the degree of satisfaction from the currently used cost accounting system. Companies that do not intend to adopt ABC (ABC deniers) were found to be more satisfied with their existing cost accounting system in comparison to ABC supporters. We also report the characteristics of companies that still have complete ignorance of the ABC technique (ABC unawares).Originality/valueThe paper not only proceeds in a thorough analysis of the benefits perceived in relation to ABC as they have been presented in similar research, but also moves a step further and groups these benefits into distinct categories as well as ranks them in order of perceived importance. Furthermore, it analyzes the basic characteristics of the firms that have complete ignorance of ABC (ABC unawares), a group that is rarely met in ABC research papers.

The adoption and implementation of activity‐based costing in Thailand

While a number of studies relating to activity‐based costing (ABC) have been conducted, relatively few have been conducted in the South East Asia region. This paper reports the results of a survey of firms in Thailand regarding issues associated with ABC adoption and implementation. The study finds that the rate of ABC adoption in Thailand was relatively high (58% of all respondent firms having ABC knowledge and adopting ABC as an idea; 35% of respondents overall) compared with other Asian countries. In particular, firms with greater variation in product complexity, complexity of production service processes and intensity of capital equipment were more likely to adopt ABC. In line with previous studies, top management support was identified as a key criterion influencing the success of ABC.

Modern Costing Innovations and Legitimation: A Health Care Study

This article is a study of the introduction of a modern costing technology—activity based costing (ABC)—into a health care organization which is undergoing change. The transformation of this organization is of particular interest as it focused on the experience of a service which had always existed by collecting blood, which is given as a free donation (the gift), and which is then converted into a variety of health care products. Typically, accounting innovations in the U.K.'s National Health Service are at the behest of central government: In this case, the adoption of ABC is on the initiative of the health care organization itself. The attractiveness of the specific costing approach from the perspective of the management of this health care organization is as an ingredient in legitimation—the portrayal of this entity as a ‘complete organization’.

An examination of international differences in adoption and theory development of activity-based costing

Abstract This paper examines the theory development and implementation of activity-based costing (ABC) in an international managerial accounting context. More specifically, each phase of ABC theory development and various aspects of ABC implementation are evaluated based on a critical review of ABC research that has been published thus far using an international perspective. This is intended to synthesize the ABC theory development and implementation delineating any international differences that potentially exist. There have been notable differences in the rates of ABC adoption in different countries in the early days of ABC dissemination. U.K., Australian, and Scandinavian firms followed adoption ofABC in the U.S. in its early days without too much gap in the implementation time frame. A global perspective, however, was so evident in the diffusion of ABC in different countries. The paper analyzes why there have been very little international differences in the ABC theory development.