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The Impact of the Activity-Based Costing on SMEs’ Financial Performance in Lusaka, Zambia (I)

Author

Listed:
  • Anthony MWILA

    (Copperbelt University, Kitwe, Zambia)

  • Vincent MASAKA

    (Copperbelt University, Kitwe, Zambia)

  • Kaombe TUKUMANA

    (Copperbelt University, Kitwe, Zambia)

Abstract

While several studies have been conducted regarding the impact of Activity-based costing (ABC) system on the financial performance of a firm, to a larger extent they were focused on large enterprises who are mainly established in developed economies. There have been very few studies focused on small and medium sized enterprises and specifically those in the developing/emerging economies. This project therefore sought to explore the impact of Activity-based costing on the financial performance of small and medium sized enterprises based in Lusaka, Zambia, being a developing economy. The specific objectives of the study were to investigate the relationship between Activity-based costing and financial performance in SMEs based in Lusaka, the impact of the implementation of ABC in SMEs on cost control and cost reduction, and the reasons why the majority of SMEs have not adopted the use of the ABC system. An analysis of the responses from 20 participants in the survey revealed that only seven respondents (35%) had implemented the ABC system, while the other 13 (65%) were still using a traditional costing system. The study further revealed that all the SMEs who had adopted the ABC system had reported a positive impact on their financial performance, as well as on cost control and cost reduction. Furthermore, the study showed that there were three major reasons that the respondents indicated for not adopting the system, namely being satisfied with the traditional costing system (53.85% of the respondents), the high cost of implementing the ABC system (30.77% of the respondents), and lack of expertise to implement the ABC system (15.38% of the respondents). The contribution of this study to the body of knowledge is that the findings will contribute to the understanding of the impact that the adoption and implementation of the ABC system has on the financial performance of SMEs particularly those based in Lusaka, this being the first study on this topic. In addition, the findings of the study will contribute to the understanding of the reasons for low implementation of the ABC system among SMEs in Lusaka.

Suggested Citation

  • Anthony MWILA & Vincent MASAKA & Kaombe TUKUMANA, 2022. "The Impact of the Activity-Based Costing on SMEs’ Financial Performance in Lusaka, Zambia (I)," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 3(6), pages 42-50, June.
    • Handle: RePEc:ahd:journl:v:3:y:2022:i:6:p:42-50
    DOI: 10.37945/cbr.2022.06.05
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    References listed on IDEAS

    as
    1. Maha Faisal Alsayegh, 2020. "Activity Based Costing around the World: Adoption, Implementation, Outcomes and Criticism," Journal of Accounting and Finance in Emerging Economies, CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan, vol. 6(1), pages 251-262, March.
    2. Walid ElGammal & Janine Saba Zakka & Abdul-Nasser El-Kassar & Ghiwa Dandash, 2016. "Reasons behind the non-application of the activity based costing system in developing countries, case of Lebanon," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(3), pages 417-435, July-Sept.
    3. Hill, Nancy Thorley, 2000. "Adoption of costing systems in US hospitals: An event history analysis 1980-1990," Journal of Accounting and Public Policy, Elsevier, vol. 19(1), pages 41-71.
    4. Witchulada Vetchagool & Marcjanna M. Augustyn & Mike Tayles, 2020. "Impacts of activity-based costing on organizational performance: evidence from Thailand," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 28(3), pages 329-349, May.
    5. Sudhashini Nair & Xin Tan, 2018. "Factors Influencing the Implementation of Activity-Based Costing: A Study on Malaysian SMEs," International Business Research, Canadian Center of Science and Education, vol. 11(8), pages 133-141, August.
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    More about this item

    Keywords

    Activity-based costing (ABC); costing systems; small and medium enterprises; overhead costs; traditional costing system;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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