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APPLICATION OF ACTIVITY BASED COSTING IN MANUFACTURING COMPANIES IN BANGLADESH: A SURVEY BASED STUDY

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Author(s): Nikhil Chandra SHIL | Alok Kumar PRAMANIK

Journal: USV Annals of Economics and Public Administration
ISSN 2285-3332

Volume: 12;
Issue: 1(15);
Start page: 170;
Date: 2012;
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Keywords: Activity Based Costing | Manufacturing Company | Survey | Bangladesh

ABSTRACT
The widespread environmental change has forced many organizations to change and re-think their businessand competitive strategies, particularly cost management system, in order to achieve the competitive edge in themarketplace. Successful organizations are those that are able to improve quality, lower costs and efficiency ofoperations and eliminate products and services that incur losses. This explains why some organizations are successfulwhile others fail. An organization costing system is a system that helps the management with the strategy planningwhile the system plays an important role in providing accurate cost information about the products and customers. Inother words, the costing management system is important to provide timely and quality information to help managers intheir decision making process. To achieve this, many organizations shift their focus from conventional or traditionalcosting system to an increasingly popular cost methodology system that is Activity- Based Costing (ABC). This systemidentifies cost pool or activity centers in an organization. It simply collects cost in functional activity cost pools andthen applies costs to products/services using individual cost drivers (Brignall, 1997). It assigns cost to products andservices (cost drivers), based on the number of events or transactions that are taking place in the process of providing aproduct or service. From the very beginning, when this system was introduced, it has already proved its popularityamong the manufacturing context.A satisfactory number of research and studies reveal how the ABC system in the manufacturing sectors haseffectively kept the operational cost at marginal level and still be able to provide better customer service at the sametime. Thus, this study analyses how an ABC costing system that improves operations and to better meet the needs ofcustomers in a more cost – effective manner. In Bangladesh, the research on application of is very rare that made theresearchers interested to conduct a research in this area. It will enlarge the scope of further research benefiting thepractitioners to come up with strong solutions to the problems identified in the research. A semi-structuredquestionnaire is designed to conduct the field survey. And descriptive statistics are used to present the survey findings.As the research is a preliminary one, the discussions are kept simple and the analysis is simplified just to highlight thepractices in some selective areas.
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