An Analysis of Activity Based Costing Practices in Selected Manufacturing Units in India

Authors

  •   Amit Kumar Arora Assistant Professor (Corresponding Author), KIET, Group of Institutions, Ghaziabad - Meerut Highway, NH-58, Ghaziabad - 201 206, Uttar Pradesh
  •   M. S. S. Raju Professor, School of Management Studies, Indira Gandhi National Open University (IGNOU), Maidan Garhi, New Delhi - 110 068

DOI:

https://doi.org/10.17010/ijf/2018/v12i12/139889

Keywords:

ABC System

, Activity Based Costing, Product Diversity, Implementation of ABC

L25

, M10, M11, M40

Paper Submission Date

, July 7, 2018, Paper sent back for Revision, November 5, Paper Acceptance Date, November 17, 2018

Abstract

This study was an attempt to analyze the motives for implementation and causes for non implementation of activity based costing (ABC) system and to establish the relationship between the company characteristics and use of the ABC system in selected manufacturing units in India. The study targeted medium and large scale companies having at least 100 employees and a minimum investment of Rs. 5 crores in plant and machinery. Logistic regression and descriptive statistics were performed to analyze the data through SPSS. The study found a number of employees and the percentage of overheads as significant company characteristic factors for the implementation of the ABC system. More adequate pricing decisions, better overhead cost allocation, and more accurate product cost were found as the motives for the implementation of the ABC system. The major challenges faced during the adoption process of the ABC system are selecting cost drivers, high cost of ABC, data collection difficulties, and uncertainty of ABC benefits. Costly to switch to ABC, easy to track cost, satisfied with current system, and uncertainty of ABC benefits were found as the main causes for non adoption of ABC. The study recommended the implementation of the ABC system to get the various benefits associated with it.

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Published

2018-12-01

How to Cite

Arora, A. K., & Raju, M. S. S. (2018). An Analysis of Activity Based Costing Practices in Selected Manufacturing Units in India. Indian Journal of Finance, 12(12), 22–31. https://doi.org/10.17010/ijf/2018/v12i12/139889

Issue

Volume 12, Issue 12, December 2018

Section

Articles
Crossref
Scopus
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Europe PMC

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