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Activity-Based Costing (ABC): Implementation and Success in Pakistani Companies

Author

Listed:
  • Muhammad Bilal Lodhi
  • Irem Batool
  • Zunaira Khadim

    (COMSATS Institute of Information Technology, Sahiwal.)

Abstract

The main quest for this research is to examine the actual implementation experience of the Activity-Based Costing system in the corporate sector of Pakistan. The study investigates the benefits received that are associated with the successful implementation of Activity-based Costing. The study aims to investigatetwo dimensions of ABC system: 1) what are the key internal organizational success factors for ABC's successful Implementation? 2) Whether ABC system successful implementation is helpful or not in the realization of the associated benefits? Path regressionanalysis based on Structural Equation Modelling Technique (AMOS) has been used to verify these hypothetical relationships.Our results verify that internal organizational factors such as management commitment, top management support, implementation training, and resource adequacy have a positive impact on ABC's successful implementation. Consequently, ABC's successful implementation ensures the attainment of associated benefits such as accurate product costing and better overhead cost allocation. However,the study fails to link it with cost reduction and a better budgeting process.

Suggested Citation

  • Muhammad Bilal Lodhi & Irem Batool & Zunaira Khadim, 2018. "Activity-Based Costing (ABC): Implementation and Success in Pakistani Companies," Pakistan Journal of Economic Studies, Department of Economics, The Islamia University of Bahawalpur, Pakistan., vol. 1(2), pages 131-151, December.
    • Handle: RePEc:akw:iupjes:v:1:y:2018:i:2:p:131-151
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    More about this item

    Keywords

    Activity-Based Costing; Organizational Factors; Implementation; Accurate costing; Cost reduction; Structural Equation Modeling; Pakistan.;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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