ABC implementation in the Nelson Mandela Bay Metropole: How far should manufacturing organisations go?

Abstract

Activity-based costing (ABC) success factors have been studied in past research, mostly by using commonly  known success factors. In this qualitative study, a literature review and interviews were used to establish what factors are responsible for the successful implementation of ABC. The number of semi-structured  interviews was limited to 13 ABC adopters in the Nelson Mandela Bay Metropole. The fi ndings suggested that ABC can be enhanced with the use of activity-based budgeting (ABB) and activity-based management (ABM). In addition, the use of ABC in conjunction with capital investment decisions may ensure that correct decisions are made when critical long-term projects are considered. Extensive identifi cation of cost drivers is benefi cial to the extent where the product loses its relationship with the overhead cost. It is evident from this research that considering fi xed indirect overheads in ABC is not always benefi cial for a manufacturing organisation  unless there is a clear link to the end-product.

Key words: activity-based costing (ABC), budgeting, implementation, success factors, metropole, capital investments, competition