Activity-based costing in small manufacturing firms: South African study

Abstract

This is an empirical investigation by means of a survey of the experiences and perceptions of activity-based costing (ABC), as an alternative to traditional costing, in small manufacturing firms in the Southern Gauteng region of South Africa. The objectives of the study were to determine the: Extent to which ABC is adopted; Perceptions of the benefits and the barriers of ABC; Experiences regarding the practice of ABC; and Reasons why firms do not adopt ABC. An analysis of 48 questionnaires indicated that 16 firms implemented ABC whilst 32 did not adopt this approach. The study firstly found that the ABC users have been in business significantly longer than the non-users, ABC users’ firms are significantly larger than the non-users firms’, there are some significant differences in the perceptions between the users and non-users regarding the benefits and the barriers of implementing ABC, that the ABC users are to a great extent neutral in respect of the practical issues of ABC and finally, that the non-users of ABC are of the opinion that ABC is too expensive to implement. The contribution of this study is that it fills the gap regarding to the lack of empirical research of ABC in small manufacturing firms and especially the lack of empirical research on ABC in South African firms.