Implementation Problems of Activity Based Costing: A Study of Companies in Jordan

Abstract

The aim of this study is to know the implementation rate of activity based costing system in Jordanian Limited Liability Companies (LLC) and to know the most important problems which face the implementation process. Two data collection methods used in current study. Firstly, a quantitative method conducted by using a questionnaire survey to determine ABC adoption and implementation rate. This followed by a qualitative method, semi-structured interviews were utilized to find out the most important barriers and problems which face the implementation process of ABC implementation. The  results  of  this  study  showed  that  ABC  implementation  rate  in  Jordanian  Limited  Liability Companies (LLC) is approximately 3.5% measured according to the third criteria which combine between implementers and users. This criterion used before by [3] in 2012. Regarding the interviews analysis, the data analysis counted on within-company analysis to know the background of each company, the barriers and problems encountering the implementation of ABC. This analysis followed by cross-company analysis to know all barriers and problems identified by all companies. The research results suggested that Jordanian Economic Crisis caused by the wars around Jordan in Iraq and Syria led to stop all the new management accounting initiative such as ABC. ABC is too costly, spending too much time, not our priority also a barrier mentioned by the companies. These followed by a lack of top management support, difficulties of choosing of cost drivers, Activity-based costing software can be expensive and high cost consultants as the problem hindering the implementation of ABC, followed by difficulty in identifying activities, lack of local consultants, and changes required for company structure to fit activities selected.