A survey of the adoption of activity based costing systems by selected companies in Kenya

Abstract

This study sought to establish the extent to which Activity Based Costing (ABC) systems are in use in Kenya. Further the study sought to establish the characteristics of companies using ABC together with those of companies planning to adopt ABC. These characteristics were compared with those of the companies found not using ABC and/or were not planning to adopt ABC. The study further established the reason and motivation . for adopting ABC and surveyed the realized benefits of the ABC systems. The research also established the difficulties faced by companies as they adopted the ABC systems and established the costing circumstances of the companies surveyed to establish the suitability of ABC systems. To achieve the above primary data was collected through the use of a structured questionnaire and data was collected from thirty-five companies. Fifty-four percent (nineteen companies) were found to be using ABC. Three companies were planning to adopt ABC. Seventy seven percent (27 companies) were found to be suitable for adoption of ABC. The main reason for adoption of ABC was to have improved cost control and management while the main motivation was to reduce costs. ABC systems were reported to be complicated by companies that had not adopted them. These companies lacked the resources to implement ABC systems. The companies that had adopted ABC cited problems in identifying activities and assigning costs to cost pools. They ranked highly the use of ABC in cost management and strategic planning. The research however established that there was no association between the various company characteristics and the adoption of ABC. This implies that ABC can be used widely across the various companies regardless of their size, turnover, total products offered or the state of production technology.