Is the activity based costing system a viable instrument for small and medium enterprises? The case of Mexico

Abstract

Small and medium-sized firms (SMEs) face serious challenges in order to be competitive, and they needto develop strategies enabling them to control their costs. This work aims to analyze and evaluate theimpact, penetration and characteristics of Activity-Based Costs (ABC). This research is of a quantitativetype descriptive design, with a sample of 180 SMEs. The results show low penetration of the ABC in SMEsusing traditional systems, due to the lack of knowledge, and that there are enterprises that do not use anycosting system at all. Finally the Mexican SMEs recognize the compatibility and usefulness of ABC, andthat the most important fact is to understand the possible application of different costing methodologiesfor different purposes.

Activity-Based Costing: Helping Small and Medium-Sized Firms Achieve a Competitive Edge in the Global Marketplace

“…At the same time, growing awareness of the importance of SMEs, which as reported earlier, represent more than ninety per cent of all employment around the world, has provided the impetus for further investigation of the potential for ABC to help SMEs become competitive and thrive in today's competitive market environment [64], [70][71][72][73][74][75][76][77][78][79][80][81][82] and for the development and use of software to implement ABC, such as 3Com Technology [83] or SAS (OROS System) [84]. The literature recognizes a number of potential benefits to SMEs from ABC.…”

“…SMEs experience difficulty in fitting ABC into existing organizational structure and IT, and identifying activities and interpreting results [76,99]. Some managers are simply unaware of ABC [76,77,81].…”

“…Organizational learning constraints: Some SME managers do not understand the impact of ABC on the organization [33] and/or are not convinced that ABC can provide information to support decision making [76]. In some firms, there is a lack of sufficient data collection [70,100,107], and pinpointing the specific data needed and displaying it in a manner that makes sense to employees is challenging [33,72,73].…”

“…Fiscal problems are particularly serious for SMEs because they have fewer resources but face the same competitive challenges as larger businesses [76]. SMEs are often cash flow-strapped due to inventory in the supply chain [73] and cannot afford software tools that could assist in implementation of ABC [77,78,104].…”

Abc Model for Economic Development of a Firm

“…The motive of this research is to develop a model for proper calculation of service costs. Wrong calculation of the cost may lead to wrong management decisions, because cost-effective production can be refused, or, vice versa, unpromising production can be even increased (Ríos-Manríquez et al 2014). Application of ABC (Activity-Based Costing) allows the head of a firm to more accurately determine the value of a product, especially in such a situation where indirect costs exceed direct ones (Kolosowski, Chwastyk 2014;Schulze et al 2012;Shapiro 1999).…”