The design and implementation of Activity Based Costing (ABC): a South African survey

Abstract

Activity Based Costing (ABC) has been researched extensively in developed countries. Research on these issues in South Africa is limited. This article creates a better understanding of the design of ABC systems in South Africa, comparing ABC implementation in South Africa to that in several developed/developing countries. A quantitative methodology was adopted to evaluate the extent of ABC implementation. A survey-case study methodology was used to identify reasons for implementation/ non-implementation, problems and critical success factors relating to implementation. The results show that the extent of ABC implementation in South Africa is lower than that found in developed countries, but the evidence is inconclusive. Nevertheless, the results suggest that the issues facing ABC implementers in South Africa are similar to those faced in many other countries. This study provides South African companies with a comparative framework of important variables to be considered in implementing ABC.

Quality in management accounting: approach by activities in large companies

“…The reasons given by the respondents are also convergent with other reviewed studies (Arsénio and Machado, 2013;Kallunki and Silvola, 2008;Sartorius et al, 2007).…”

“…The two most frequently mentioned factors were: lack of interest in the approach (19%); and the high costs associated with its implementation (18%). These factors are convergent with those identified by Sartorius et al (2007), Tomás et al (2008), and Arsénio and Machado (2013).…”

“…An identical percentage (12%) was found by Sartorius et al (2007) in 181 South African companies. Three studies conducted in the same year, but in different countries, showed very close ABC utilization rates: the study of Tomás et al (2008), conducted in Portugal in the 500 largest non-financial companies had a rate of 22%; Kallunki and Silvola (2008) reported an utilization rate of 21% in 500 Finnish companies from various activity sectors; Banker et al (2008) analyzed 27,000 American industrial companies, and found an ABC utilization rate of 20%.…”

“…Most studies shown in Table 1 present ABC utilization rates below 22%. Sartorius, et al (2007) 181 South-African companies 12% Tomás, et al (2008) 500 Portuguese companies 22% Kallunki e Silvola (2008) 500 Finish companies 21% Banker, et al (2008) 27.000 American industrial companies 20% Stratton, et al (2009) 348 Industrial companies and global services 50% Schoute (2011) 191 Dutch industrial companies 11% Arsénio and Machado (2013) 46 Listed Portuguese companies 31%…”

“…Sartorius et al (2007), Kallunki and Silvola (2008), and Arsénio and Machado (2013) have also analyzed the main reasons for the implementation of the method: cost reduction; an increase in competitiveness; an improvement in performance evaluation; obtaining accurate information to support the decision-making process; and an accuracy increase in indirect cost allocation.…”