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

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 investigate two 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 regression analysis 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.