Literature review on the links between the adoption of the ABC method and improved corporate performance

Abstract

Organizational performance is affected by changes in the competitive environment. Indeed, in a context of fiercer competition, accounting practices have undergone significant changes due to globalization, digital transformation,

and regulations. The need for management tools that can provide them with appropriate information at the right time is essential for planning and decision-making. The role of management accounting is now well established. It consists of helping managers solve their management problems and improve their competitiveness. To achieve these objectives, contemporary cost calculation methods are tested and applied, such as the Activity Based Costing (ABC) method. According to its proponents, the ABC method was developed as a cost calculation system that provides accurate information on product or service costs, thereby facilitating pricing and decision-making (Cooper, Kaplan, Maisel, Morrissey, & Oehm, 1992). However, it quickly became apparent that activity-based information was also useful for supporting continuous improvement programs, such as cost management, efficiency improvement, cost reduction, and the production of more relevant and improved performance measures (Turney, 1991; Tsai, 1998; Ozkan & Karaibrahimoglu, 2013). This study aims to examine a literature review on the ABC method compared to traditional analytical accounting, focusing on emerging key themes in academic research and practice. The objective is to understand the advantages and disadvantages of the ABC method, as well as its impact on business performance. Specifically, the study will look at the definitions of the ABC method and its use to improve organizational performance. It will also examine the results of studies on the links between the ABC method and organizational performance, focusing on key indicators such as profitability, productivity, quality, and customer satisfaction.

Keywords: activity-based costing, adoption, cost calculation system, performance

JEL Classification: M4

Paper type: Theoretical Research