Activity Based Costing System

Competition is one of the problems that a company should address. It can cause a major stumbling block to growth and success in businesses that triggers a company’s aggressiveness into the market that makes a manager think about how to get an edge over it. Managers apply different kinds of business techniques and strategies to come up with the best method to achieve customer satisfaction, but not sacrificing a significant edge to the business. As time goes by, level competition among businesses becomes higher and higher that traps businesses to an unending cycle of innovations. To be able to address it, top managers must devise a more accurate, flexible and sound business strategies and decision, intended to have a competitive advantage over

The managers should be equipped of new strategies, proven techniques and methods to achieve more precise insights into creating value. Activity-based costing is one of these methods. Considerable effort has been devoted in the last two decades to the development of more sophisticated costing systems. The need to improve the accuracy of product costing information was driven by the changes in the competitive landscape as well as increased global competition (Cooper, 1988). Over the last 20 years there has been a shift in manufacturing priorities away from the production of a standardized product at low cost to strategic priorities focusing on responding to customers’ demands for greater product diversity. These new competitive conditions challenged the validity of conventional costing systems. More specifically, it was argued than increasing product diversity introduced the risk of significant inaccuracies in a product cost assignment using traditional costing approaches (Cooper & Kaplan, 1988). The limitations of traditional costing systems in this new manufacturing environment cannot be denied. Management accounting researchers have devoted considerable effort to addressing these limitations. Almost all attention has been devoted to studying activity-based costing (ABC) systems. These systems emerged

Conceptual Framework

Source: (Zhang, 2009:149)

This study will only use organizational culture, technical and organizational factors as guide throughout the study to determine the relationship of organizational and environmental characteristics and technical factors to the level of success of ABC adoption of manufacturing companies in Batangas Province. Due to limited time, the researchers won’t be able to include all the variables stated in this framework.

Operational Framework

Figure 2. Operational Framework

Based upon the conceptual framework, the researchers were able to construct the diagram above. The researchers aim to know the profile of the respondents in terms of organizational and environmental characteristics which are product diversity, firm size as to the number of employees and annual turnover, and business unit culture. It is also imperative to determine the technical issues or difficulties encountered and their extent when adopting ABC. This research aims to determine the relationship of the organizational and environmental characteristics and technical issues to the level of success of the adoption of activity-based costing. Despite the known usefulness and success of activity-based costing, the researchers are eager to know if the relationship of the organizational and environmental characteristics and technical issues, to the adoption of activity-based costing in the manufacturing companies in Batangas