Adoption and Success of ABC Samples †MyAssignmenthelp.com

Question: Discuss about the Adoption and Success of ABC . Answer: Introduction Activity Based Costing (ABC) refers to a particular method of costing that helps the business organizations in the identification of all the costing activities in the companies so that they can assign indirect costs to the manufactured products (ker zyapici, 2013). In the recent years, it can be seen that companies all over the world have started to adopt the method of ABC for their business organizations. However, some specific factors are there in the companies that influence the adoption of ABC. It is important for the companies to consider those factors as the success of ABC largely depends on them. Discussion In the recent years, it can be seen that ABC has become most popular in most of the countries all over the world. As per Abdallah Li, (2008), the main reason is that it is easy for the organizational managers to implement the process of ABC in order to find the costs of the company. Thus, it can be seen that companies prefer the implementation of ABC over the method of traditional costing. In the business organizations, ABC works in two stages. In the first stage, managers use to allocate the overhead costs into different cost pools based on their activity based on cost classification. In the second stage, the managers use a series of cost drivers in order to allocate the overall costs in the product lines (ker Ad?gzel, 2016). In this context, it needs to be mentioned that the traditional costing method is fully based on payroll of the employees and thus, it create obstacles for the mangers in measuring the performance of the employees. This is one of the reasons that lead to the a doption of ABC in most of the business organizations all over the world. In spite of the growing popularity of ABC all over the world, management of some of the major corporations are facing difficulties while using ABC. Thus, it can be understood that certain factors in the organizations lead to the success or failure of ABC (Abdallah Li, 2008). The major success factors for ABC in the companies are the assistance of top level management; effective integration between ABC and various organizational strategies like Just-In-Time (JIT), Total Quality Management (TQM) and others; establishment relation between ABC and the process of performance evaluation of employees; adequate training and development activities for using ABC; availability of organizational resources for the implementation and running of ABC and others (Abdallah Li, 2008). At the same time, certain factors lead to the failure of ABC in the companies. They are lack of transparent purpose of the business; lack of commitment from the top level management reading the implementation of ABC; delegation of authority in ABC; the resistance from employee as well as the management to bring change in costing method; poor design of ABC model and others. In this context, it needs to be mentioned that due to the above mentioned factors, the implementation of ABC failed in t he Bank of China (Abdallah Li, 2008). Organizations all over the world use different approaches to measure the success of the implementation of ABC in the companies. However, most of the companies use two major approaches or methods to measure the success of ABC (Allah Rahmouni Charaf, 2012). As per the first approach, organizational managers use single or multiple items to measure the success of ABC. In this approach, the use of single item has been criticized as it has failed to measure the overall success of ABC in the companies. For this reason, organizational managers have started using multiples items or variables for measuring the success of ABC. In this context, the assistance of ABC in decision making can be used as there are many instances where the organizational managers have used information extracted from ABC for making effective organizational decisions (Allah Rahmouni Charaf, 2012). As per the second approach, the success of ABC is measured based on the measurement of success in each step of the project . In this particular approach, the progress of each activity is measured for the completion of the second stage. As a result of this approach, the organizational managers can actually ensure the success of the whole project based on each step of the project. Thus, it can be seen that companies uses these two approaches for measuring the success of ABC. However, it needs to be mentioned that there are many other approaches to measure ABC success (ker zyapici, 2013). Every business organizations all over the world have to follow certain steps at the time of implementing the system of ABC in their companies. It is important for the companies to implement ABC in the effective and efficient basis as the success of mostly depends on the success of the each level implementation of ABC. It can be seen that there are a total of six stages in the implementation of ABC in the companies (Byrne, Stower Torry, 2009). The first stage is Initiation. In this particular stage, the analysis of feasibility of the adoption of ABC in the companies is done. This particular process ensures that the ABC implementation is done as per the nature and business operations of the companies. The second important stage is Adoption (Drury, 2013). This is a crucial stage in ABC implementation. In this stage, the amount of resources required for the implementation of ABC is determined. The third stage in ABC implementation is Adaptation. In this stage, the analysis of ABC is don e based on some of the key factors like the activities of the firm, various cost drivers and others. In this stage, the information of ABC is available, but they are not used for decision-making and other purposes (Byrne, Stower Torry, 2009). The fourth stage is Acceptance. In this stage, ABC is considered as a model or project that the top level management uses for decision-making. The next important stage is Routinisation. This is considered as a normal part of the management information system that the upper level management use in order to make effective business decisions. The last stage in ABC implementation is Infusion or Integration. This is the last stage of ABC implementation where the system is integrated with the organizational financial system. These are the six major stages of ABC implementation. In this context, it needs to be mentioned that Australia is one of the countries where the vast use of ABC can be seen (Byrne, Stower Torry, 2009). In United Kingdom, there are some major motives that work as the prime reasons behind the adoption of ABC in the companies. Majorly, companies switch to ABC as the current costing system fails to deliver the required important information to the companies for various purposes. It can also be seen that the companies move to ABC as it is required for them to update their current costing system (Al-Omiri Drury, 2007). Sometimes, due to the unreliability of the existing costing system forces the companies to implement ABC. The use of traditional costing system sometimes fails to align with the changing manufacturing environment of the companies. However, ABC can be well aligned with the changing manufacturing environments of the companies. ABC is consisted as one of the most sophisticated costing system and this is one of the reasons companies are opting for the implementation of ABC. A major aspect is the cost regarding the running of the costing systems. Companies have to bear high co sts in case of traditional costing system. However, the adoption of ABC costs the companies less while running the system. High level of synchronization can be seen between the accounting system of the companies and ABC (Al-Omiri Drury, 2007). Thus, it can be seen that all the above mentioned reasons lead the companies for the adoption of ABC for their manufacturing operations. There are certain behavioural and organizational factors in the business organizations that are associated with the success application of ABC (DraÃ… ¾i? Dragija, 2012). In most of the business organizations, organizational people ABC as the most appropriate tool for the calculation of product cost at various level of production. However, it has been seen that most of the companies failed to apply the various techniques of ABC for their costing purposes. This is because of some organizational as well as behavioural factors in the companies. Employees of most of the companies are reluctant to accept the changes in their companies and thus, they cannot happily welcome the introduction of ABC as their new costing system. In addition, sometimes companies get little support from upper level management for the application of ABC as their prime costing system (Senthil Bte, 2010). These are the major behavioural and organizational factor that leads to ineffective application of ABC. Conclusion From the above discussion, it can be seen that most of the companies all over the world are adopting ABC as their costing system. This is because ABC helps the companies in taking effective business decisions and the system is easy to implement. The above study also shows that companies use two major approaches to measure the success of ABC. It can also been seen that the companies follow six major steps at the time to implement the system of ABC in their companies. References Abdallah, A. A. N., Li, W. (2008). Why Did ABC Fail: at the Bank of China?.Management Accounting Quarterly,9(3). Allah Rahmouni, A. F., Charaf, K. (2012). Success of ABC Projects in French Companies: The Influence of Organizational and Technical Factors.Cost Management,26(6), 12. Al-Omiri, M., Drury, C. (2007). Organizational and behavioral factors influencing the adoption and success of ABC in the UK.Cost Management,21(6), 38. Byrne, S., Stower, E., Torry, P. (2009). Is ABC adoption a success in Australia?.Journal of Applied Management Accounting Research,7(1), 37. DraÃ… ¾i? Lutilsky, I., Dragija, M. (2012). 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