Identified difficulties in implementing the activity-based costing: an exploratory case study

Abstract

This paper presents the results from a research that describes the difficulties in implementing the activity-based costing (ABC) method. It was developed during 2007 in a make-to-order (MTO) company located in Belo Horizonte/MG. The data collection was based on semi-structured and non-structured interviews, administrative records review and obtrusive observation. It was verified that the MTO managers did not perform a satisfactory cost-benefit analysis in order to support the decision to start using the ABC method. Furthermore, some difficulties were observed in terms of using the ABC: (a) limited communication between the external consultants and the MTO employees; (b) restricted support from the top management; (c) inexistence of an adequate information system; and (d) collected data from systems which are not based on effective internal control procedures. The difficulties identified in the research corroborate the results from researches described in the national and international literature. One can say that the findings of this research represent a contribution to the understanding on how the ABC is implemented in MTO companies, particularly in Brazil where has been very few researches focused on such companies. It is important to the note that the present research could be expanded by replicating it in several MTOs. This would allow the generalization of the difficulties related to the use of the ABC by MTO companies.