An empirical study of activity-based costing (ABC) systems within the Jordanian industrial sector: Critical success factors and barriers to ABC implementation

Abstract

Purpose – The aim of the study is to contribute to a better understanding of activity-based costing (ABC) implementation systems in the context of a developing country such as Jordan. The main objectives of the study were to determine the extent of ABC implementation within the Jordanian industrial sector and identify the factors that facilitate and motivate the decision to implement ABC. Additional objectives include determining the problems associated with ABC implementation and assessing the degree of success of ABC implementation.

Design/methodology/approach – A questionnaire survey was conducted during 2008 among 88 Jordanian industrial companies that are listed on the Amman stock exchange. Eighty-eight questionnaires were distributed and 61 were returned giving a rate of response of 69.3%.

Findings – The survey findings indicate that ABC implementation among the Jordanian industrial companies is quite satisfactory. The rate of ABC implementation is about 55.7%. The most cited factors that facilitate the decision to implement ABC were that adequate training was provided for designing ABC and operating data in the information system are updated in real time: followed by the fact that adequate training was provided for using ABC. The most influential factors that motivate the process of ABC implementation are among others the increasing proportion of overhead costs, growing costs, including product costs and administrative costs, and currently the increasing number of product variants. Further factors are identified in the paper.

Originality/value – Most previous studies focused only on the implementation of ABC in western developed countries. The results of this study make a contribution to existing knowledge in the area of the implementation of ABC, especially in eastern developing countries such as Jordan. In addition, the current study used a multi-attribute to measure success of ABC implementation within the Jordanian industrial sector. This multi-attribute was composed of satisfaction with ABC implementation, the degree of using ABC in decision making and the success of ABC implementation.

Citation

Nassar, M., Morris, D., Thomas, A. and Sangster, A. (2009), "An empirical study of activity-based costing (ABC) systems within the Jordanian industrial sector: Critical success factors and barriers to ABC implementation", Tsamenyi, M. and Uddin, S. (Ed.) Accounting in Emerging Economies (Research in Accounting in Emerging Economies, Vol. 9), Emerald Group Publishing Limited, Leeds, pp. 229-263. https://doi.org/10.1108/S1479-3563(2009)0000009011