Activity-based costing in New Zealand: An assessment of ABC users and non-users in the New Zealand firm environment

This dissertation explores Activity-Based Costing (ABC) in the New Zealand firm environment. A questionnaire is distributed to users and non-users of ABC, in order to determine the differences between these two groups in relation to the perceived advantages of ABC, organisational complexity, satisfaction with costing, and performance. The influence of top management support and whether a particular strategy is evident is also examined in relation to ABC users. The results indicate that ABC users or those considering an ABC adoption have a more optimistic perception of advantages realised from ABC than non-users. No particular strategy is employed by ABC users and it also apparent that not all companies consider ABC to be tied to their competitive strategy. It is also found that not all elements of complexity necessarily precede an ABC adoption. A significant difference in satisfaction with costing is indicated between ABC users and non-users who are considering or have considered and rejected ABC. Similarly, a statistically significant difference is found between the performance of ABC users and non-users when it is indicated that the benefits of ABC outweighed the costs. The results suggest that ABC is beneficial in the New Zealand firm environment. Exploring the extent of implementation and influences such as size and industry in future research will add to the understanding of ABC in the New Zealand firm environment.UnpublishedArmitage, H. M., & Nicholson, R. (1993). Activity based costing: a survey of Canadian practice. CMA Magazine, Supplement. Armstrong, J. S., & Overton, T. S. (1977). Estimating non-response bias in mail surveys. Journal of Marketing Research, 14, 396-402. Askarany, D., & Smith, M. (2003). The Relationship between Technological Innovation, Activity Based Costing and Business Size. Retrieved 15th September, 2005, from http://proceedings.informingscience.org/IS2003Proceedings/docs/110Askar.pdf Bidanda, B., Nachtmann, H., Needy, K. L., Roztocki, N., & Warner, R. C. (2003). Implementing activity-based costing systems in small manufacturing firms: A field study. Engineering Management Journal, 15(1), 3-11. Bjorenak, T., & Mitchell, F. (2002). The development of activity-based costing journal literature 1987-2000. The European Accounting Review, 11(3), 481-508. Bouwman, M., & Cagwin, D. (2002). The association between activity-based costing and improvement in financial performance. Management Accounting Research, 13, 1-39. Brewer, P., Juras, P., & Brownlee-II, R. (2003). Global Electronics, Inc.: ABC implementation and the change management process. Issues in Accounting Education, 18(1), 49-69. Bromwich, M., & Bhimani, A. (1989). Management accounting: evolution not revolution. Chartered Institute of Management Accountants, London. Brown, D., Booth, P., & Giacobbe, F. (2001). Organisational influences, ownership and the adoption of activity-based costing in Australian firms. Paper presented at the Accounting Association of Australia and New Zealand Annual Conference, Auckland New Zealand. Brown, D., Booth, P., & Giacobbe, F. (2004). Technological and organizational influences on the adoption of activity-based costing in Australia. Accounting and Finance, 44, 329-356. Cheatham, C., & Cheatham, L. (1996). Redesigning Cost Systems: Is standard costing obsolete? Accounting Horizons, 10(4), 23-32. Chenhall, R., & Langfield-Smith, K. (1998a). Adoption and benefits of management accounting practices: an Australian study. Management Accounting Research, 9(1), 19. Chenhall, R., & Langfield-Smith, K. (1998b). The relationship between strategic priorities, management techniques and management accounting: An empirical investigation using a systems approach. Accounting Organisations and Society, 23(3), 243. Chenhall, R., & Langfield-Smith, K. (1999). The implementation of innovative management accounting systems. Australian Accounting Review, 9(3), 37-47. Cinquini, L., Collini, P., Marelli, A., Quagli, A., & Silvi, R. (1999). A survey on cost accounting practices in Italian large and medium size manufacturing firms. Paper presented at the 22nd annual congress of the European Accounting Association, Bordeaux, France. Clarke, P. (1992). Management Accounting Practices and Techniques in Irish Manufacturing Firms. Paper presented at the 15th Annual Congress of the European Accounting Association, Madrid, Spain. Clarke, P., Hill, N., & Stevens, K. (1999). Activity-based costing in Ireland: barriers to, and opportunities for change. Critical Perspectives on Accounting, 10, 443-468. Clarke, P., & Mullins, T. (2001). Activity based costing in the non-manufacturing sector in Ireland: A preliminary investigation. Irish Journal of Management, 22(2), 1-18. Compton, T. R. (1996). Implementing activity-based costing. The CPA Journal, 66(3), 20. Cooper, R., & Kaplan, R. (1988). Measure Cost Right: Make the Right Decisions. Harvard Business Review, September-October, 96-102. Cooper, R., & Kaplan, R. S. (1991). Profit Priorities from Activity-Based Costing. Harvard Business Review, May-June, 130-135. Cooper, R., & Kaplan, R. S. (1992). Activity-based systems: Measuring the costs of resource usage. Accounting Horizons, 6(3), 1-12. Cotton, B., & Jackman, S. (2002). Activity based costing: Not as "easy as ABC". Chartered Accountants Journal of New Zealand, 81(4), 35. Cotton, B., Jackman, S., & Brown, R. (2003). Note on a New Zealand replication of the Innes et al. UK activity-based costing survey. Management Accounting Research, 14, 67-72. Darlington, R. B. (n.d.). Factor Analysis. Retrieved 15th September, 2005, from http://comp9.psych.cornell.edu/Darlington/factor.htm Datar, S., & Gupta, M. (1994). Aggregation, specification and measurement errors in product costing. The Accounting Review, 69(4), 567-592. Davies, R., & Sweeting, B. (1993). Accounting and business performance. Accountancy, 112, 89-95. Dearman, D., & Shields, M. (2001). Cost knowledge and cost-based judgement performance. Journal of Management Accounting Research, 13, 1-18. Diekmann, D., & Kocakulah, M. (2001). Implementing activity-based costing (ABC) to measure commercial loan profitability. The Journal of Bank Cost & Management Accounting, 14(2), 3-15. Dixon, J. R., Nanni, A. J., & Vollmann, T. E. (1990). The new performance challenge emasuring operations for world class competition. Homewood: Business One Irwin. Dodd, D., & Lavelle, W. (2002). ABC spells improved performance. High Volume Printing, 20(6), 20-29. Doyle, S. (2002). Software review: Is there a role for activity-based costing (ABC) in database marketing. Journal of Database Marketing, 10, 175-180. Eonsoo, K., Dae-il, N., & Stimpert, J. (2004). Testing the applicability of porter's generic strategies in the digital age: A study of Korean cyber malls. Journal of Business Strategies, 21(1), 19-46. Fennema, M., Rich, J., & Krumwiede, K. (2005). Asymmetric effects of activity-based costing system cost reallocation. Advances in Accounting Behavioral Research, 8, 167-187. Gartman, C. (2005). Opportunities and competitive advantages for the future. Franchising World, 37(6), 27-29. Gordon, & Silvester. (1999). Stock market reactions to ABC adoptions. Journal of Accounting and Public Policy, 18(3), 229-251. Gosselin, M. (1997). The effect of strategy and organisational structure on the adoption and implementation of activity-based costing. Accounting Organisations and Society, 22(2), 105. Govindarajan, V., & Fisher, J. (1990). Strategy control systems and resource sharing: Effects on business unit performance. Academy of Management Journal, 33(2), 259. Govindarajan, V., & Gupta, A. K. (1985). Linking Control Systems to Business Units Strategy: Impact on Performance. Accounting, Organizations and Society, 4(1), 51-66. Gupta, & Galloway, K. (2003). Activity-based costing/management and its implications for operations management. Technovation, 23, 131–138. Gupta, & Govindarajan, V. (1984). Business unit strategy, managerial characteristics and business unit effectiveness at strategy implementation. Academy of Management Journal, 27, 24-41. Harvard-MIT. (n.d.). Harvard-MIT data center's guide to SPSS. Retrieved 23rd September, 2005, from http://data.fas.harvard.edu/projects/SPSS_Tutorial/spsstut.shtml Heneman, H. (1974). Comparisons of self and superior ratings of managerial performance,. Journal of Applied Psychology, 59, 638-642. Hicks, D. (1997). Impediments to adopting ABC at smaller organisations. Cost Management Update(74), 1-3. Hicks, D. (2005). Good decisions require good models: Developing activity-based solutions that work for decision makers. Cost Management, 19(3), 32. Homburg, C. (2001). A note on optimal cost driver selection in ABC. Journal of Management Accounting Research, 12, 197-205. Hoque. (2000). JIT production, automation, cost allocation practices and importance of cost information: An empirical investigation in New Zealand based manufacturing organisations. British Accounting Review, 32(2), 133. Hughes, S. B., & Gjerde, K. A. P. (2003). Do different cost systems make a difference? Management Accounting Quarterly, 5(1), 22. Hussain, M. M., & Gunasekaran, A. (2001). Activity-based cost management in financial services industry. Managing Service Quality, 11(3), 213-224. Innes, J., & Mitchell, F. (1990). Activity-based costing: A review with case studies. Chartered Institute of Management Accountants, London. Innes, J., & Mitchell, F. (1991). Activity-based costing: a survey of CIMA members. Management Accounting, 28, 30. Innes, J., & Mitchell, F. (1995). A survey of activity-based costing in the UK's largest companies. Management Accounting Research, 6, 137-153. Innes, J., Mitchell, F., & Sinclair, D. (2000). Activity based costing in the UK's largest companies: A comparison of 1994 and 1999 survey results. Management Accounting Research, 11, 349-362. Ittner, C., Lanen, W. N., & Larcker, D. (2002). The association between Activity-based costing and manufacturing performance. Journal of Accounting Research, 40, 711-726. Johnson, T. H. (2002). A former management accountant reflects on his journey through the world of cost management. Accounting History, 7, 9-21. Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard: Measures that drive performance. Harvard Business Review, January-February, 71-79. Kennedy, T., & Affleck-Graves, J. (2001). The impact of activity-based costing techniques on firm performance. Journal of Management Accounting Research, 13, 19-46. Khanna, V. (2002). Learn the ABC of business. Businessline, 1. Kiani, R., & Sangaladji, M. (2003). An empirical study about the use of the ABC/ABM models by some of the Fortune 500 largest industrial corporations in the USA. Journal of American Academy of Business, 3(1), 174-190. Klein, J. (2003). Activity-based costing and benchmarking: A tandem for quality-oriented governments. The Journal of Government Financial Management., 52(3), 50. Krumwiede, K. (1997). ABC adoption hits a new high, but is ABC worth implementation costs? Cost Management Update(71), 1-4. Krumwiede, K. (1998). The implementation stages of activity-based costing and the impact of contextual and organisational factors. Journal of Management Research, 10, 239-277. Krumwiede, K., & Jordan, W. (1998). Results of 1998 survey on cost management practices--Part I: ERP implementation going strong. Cost Management Update(93), 1-4. Krumwiede, K., & Roth, H. P. (1997). Implementing information technology innovations: The activity-based costing example. Advanced Management Journal, 62(4), 4-14. Lee, J. Y., & Nefcy, P. (1997). The anatomy of an effective HMO cost management system. Management Accounting, 78(7), 49-54. Malmi, T. (1999). Activity-based costing diffusion across organizations: An exploratory empirical analysis of Finnish firms. Accounting, Organizations and Society, 24, 649-672. McCabe, B., McKendrick, J., & Keenan, J. (2004). Best value in Scottish local authorities – As simple as ABC? Journal of Finance and Management in Public Services, 2(2), 43. McCall, C. (2001). An empirical examination of the likert scale: some assumptions, development, and cautions. Paper presented at the 80th Annual CERA Conference, Tahoe, CA. Mendes, M., & Pala, A. (2003). Type I error rate and power of three normality tests. Pakistan Journal of Information and Technology, 2(2), 135-139. Miles, R. E., & Snow, C. C. (1978). Organizational strategy, structure and process. New York: McGraw-Hill. Miller, L., & Smith, K. (1983). Handling nonresponse issues. Journal of Extension, 21(5), 45–50. Mitchell, F. (1994). A commentary on the applications of activity-based costing. Management Accounting Research, 5(3-4), 261-277. Noreen, E. (1991). Conditions under which activity-based costing systems provide relevant costs. Journal of Management Accounting Research, 3, 159-168. Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press. Rahman, I. K. A., Rahman, A. Z. A., Tew, Y. H., & Omar, N. (1998). A survey on management accounting practices in Malaysian manufacturing companies. Management Accounting Practices Paper 3, Concurrent session IC, International Management Accounting Conference, National University of Malaysia, Selangor. Rosenthal, R., & Rosnow, R. L. (1991). Essentials of behavioural research: Methods and data analysis (2nd ed.). Boston: McGraw-Hill. Roth, P. L., & Switzer-III., F. S. (1999). Missing Data: Instrument-level heffalumps and item-level woozles. Retrieved September 20th, 2005, from http://aom.pace.edu/rmd/1999_RMD_Forum_Missing_Data.htm Shields, M. D. (1995). An empirical analysis of firms' implementation experiences with activity-based costing. Journal of Management Accounting Research, 7, 148. Siegel, S., & Castellan-Jr, N. J. (1988). Nonparametric statistics for the behavioural sciences (2nd edition ed.). Singapore: McGraw-Hill. Sievanen, M., & Tornberg, K. (2002). Process-based costing: The best of activity-based costing. AACE International Transactions, 151-156. Smith, R., Olah, D., Hansen, B., & Cumbo, D. (2003). The effect of questionnaire length on participant response rate: A case study in the U.S. cabinet industry. Forest Products Journal, 53(11/12), 33. Sulaiman, M., Ahmad, N. N., & Alwi, N. (2002). Management accounting practices in Malaysia: a survey of the industrial and consumer products sectors. Unpublished research report International Islamic University, Kuala Lumpur, Malaysia. Sulaiman, M., Ahmad, N. N., & Alwi, N. (2004). Management accounting practices in selected Asian countries: A review of the literature. Managerial Auditing Journal, 19(4), 493. Swenson, D. (1995). The benefits of activity-based cost management to the manufacturing industry. Journal of Management Accounting Research, 7, 167. Swenson, D., & Barney, D. (2001). ABC/M: Which companies have success? The Journal of Corporate Accounting & Finance, 12(3), 35. Tan, L. M., Fowler, M. B., & Hawkes, L. (2004). Management accounting curricula: striking a balance between the views of educators and practitioners. Accounting Education, 13(1), 51-67. Walters, A. (2003). Key performance measurement references. Retrieved 10th September, 2005, from http://www.som.cranfield.ac.uk/som/research/centres/cbp/pma/Pmrefs.htm West, T. D., & West, D. (1997). Applying ABC to health care. Management Accounting, 78(8), 22-33