Implementation of Activity-Based Costing in Malaysia
The current issue and full text archive of this Journal is available at www. emeraldinsight. com/1321-7348. htm Implementation of activity based costing in Malaysia Activity based costing in Malaysia A case study of two companies Jamaliah Abdul Majid 39 Faculty of Accountancy, Universiti Utara Malaysia, Sintok, Malaysia, and Maliah Sulaiman Kullyyah of Economics and Management Sciences, International Islamic University Malaysia, Kuala Lumpur, Malaysia Abstract Purpose – The study aims to document and highlight the problems and benefits of implementing activity-based costing (ABC) in two companies in Malaysia.
Design/methodology/approach – A case study methodology was used to describe the process of ABC implementation in a Malaysian based multinational company as well as a Malaysian multinational company. Findings – Although ABC is not widely adopted by companies in Malaysia, it is recognized as a valuable tool to improve the performance of these two companies. Additionally, many of the problems that hinder the implementation of ABC are related to managerial factors rather than the technical aspects of the tool itself.
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Several factors are pertinent to ensure the success of ABC: top management support, simplifying the ABC implementation process, sourcing suitable ABC software, and finally, ensuring that all affected employees understand and actively support the implementation process. Originality/value – The findings have significant implications for companies that want to embark on ABC. The problems highlighted may help companies planning to adopt ABC in the near future to better address these issues. Keywords Activity based costs, Malaysia, Case studies, Multinational companies Paper type Research paper 1.
Introduction The issue of more accurate overhead allocation is pertinent, particularly in the competitive and global economy of today. Often when pricing relies on flawed cost data, problems will be perpetuated. The traditional accounting approach, where cost allocation is based on labour hours or machine hours, rarely reflects the true cause and effect relationship between indirect costs and individual products. Activity-based osting (ABC) has been lauded, among others reasons, as a tool to help allocate overheads with a greater degree of accuracy.