Print Page

Implementing activity-based costing systems

in small manufacturing firms: A field study
By Roztocki, Narcyz
Publication: Engineering Management Journal
Date: Saturday, March 1 2003
HEADNOTE
Abstract: This article describes the results of a field study involving the implementation of activity-
based costing (ABC) in three small manufacturing companies. Similarities and dissimilarities
regarding company business, customer distribution, fixed-to-variable cost ratio, and costing system
needs are presented. A cost and time efficient methodology for developing and implementing ABC
in small manufacturing companies is presented. The ABC companies, implementation
methodology, and research findings are discussed. In addition, the potential impacts of ABC
implementation at these three companies are examined.
Activity-based costing (ABC) is a costing method that has gained popularity in recent decades. A
primary reason for this development lies in ABC's ability to provide more accurate cost information
for companies operating in today's globally competitive market. In addition, ABC results can be
extended to an activity-based management system to assist managers in making decisions that
can lead to higher profits (Cooper and Kaplan, 1991). Numerous large companies facing stiff
competition in the global market have recognized traditional volume-based costing's (VBC) inability
to deliver reliable cost information and are implementing ABC as a tool to improve their costing
knowledge (Johnson, 1990, 1991, 1992; Johnson and Kaplan, 1987; Turney, 1989).
Implementations of ABC in large companies have been reported in the recent literature (Shields
and McEwen, 1996). Although many years have passed since large companies began
implementing ABC, there are few reports about the implementation and use of ABC in small
manufacturing companies (Needy and Bidanda, 1995).
The objective of this field study is to examine ABC implementation in small manufacturing
companies with less than 100 employees. It is expected that both the ABC system and
implementation procedure differ from those of large firms. It is not expected that small company
ABC systems will simply be scaled down versions of large company ABC systems. Existing
differences are identified in this research. A further intention is to examine the impact of the ABC
information on small company managerial decision-making. Specifically, the extent of managerial
use of ABC information when it vastly differs from the previously obtained information provided by
the VBC system.
Literature Review
Overview. Since its introduction in the 1980s, the implementation of ABC has grown rapidly in
large manufacturing companies. Less frequent is the development and implementation of ABC in
small manufacturers. Results of surveys conducted in the mid- 1990s have shown that many small
companies are not familiar with the mechanics of ABC and have not implemented ABC systems
because of the perceived high cost of development and implementation (Benjamin, Siriwardane,
and Laney, 1994; Block, 1997; Shim and Stagliano, 1997). More recent literature has focused on
tailoring the same ABC concepts from large organizations to companies with fewer resources and
less complex structure. Gunasekaran, Marri, and Grieve (1999) have emphasized the importance
of this principle for both small and medium enterprises.
Baxendale (2001) has illustrated the benefits of developing ABC systems for small businesses.
Such companies have been able to use ABC for identification of process improvement initiatives,
development of marketing strategies, and collection of information concerning unused capacity
costs (Gunasekaran, Marri, and Grieve, 1999; Gunasekaran, McNeil, and Singh, 2000). The
simplicity of spreadsheet-based modeling platforms has allowed small businesses to capture these
benefits of ABC without complex, expensive software development (Hicks, 1999; Needy and
Bidanda, 1995). Applications in small nonmanufacturing firms, such as project-driven engineering
firms, have expanded the literature even further (Villegas et al., 1996).
More analytical studies have focused on ABC implementation methodologies for small businesses.
Bharara and Lee (1996) proposed and demonstrated an easy-to-follow 10-step procedure for
identifying cost pools, cost drivers, and activity costs. Roztocki et al. (1999) have described the
use of analytical hierarchical process (AHP) to estimate more difficultto-capture administrative
costs for small businesses and the development of cost matrices. More recent literature has
extended past the development of ABC systems to assessment and validation of the systems
using statistical analysis package (SAS) (Needy, Bidanda, and Gusen, 2000). This research
provided an example of short-term assessment and "troubleshooting" as well as long-term
validation, and it concluded that ABC models are statistically more accurate than traditional,
volume-based overhead allocation techniques.
While a few case studies have been written on the use of ABC for small businesses, there is room
for new applications of ABC in small companies. This will help small companies to learn more
about the benefits and process of implementing ABC. Many small companies still do not
understand that by configuring these costing systems to meet their own needs, they can gain
better understanding of their operation's true cost structure (Benjamin et al., 1994). This is perhaps
a first step on the pathway of continuous improvement.
Comparison to Other Relevant Research. To remain competitive, small manufacturers need more
accurate and reliable costing information than their current traditional costing systems permit.
Small companies generally have limited resources and expertise and there are severe penalties
for poor decisions. Managers at small companies may be overwhelmed by the time and effort
required to develop an extensive ABC system. These managers are concerned that the benefits of
the improved cost information will not justify the required effort and consumed resources. Inhibiting
factors including the cost of consulting support, which is estimated between 80 and 500 hours
(Hicks, 1992), possible productivity decrease during the implementation, and additional data
maintenance requirements may exceed small company resources. Pilot research suggests that
similarities exist within the ABC system development processes of small companies with different
operating characteristics (Needy and Bidanda, 1995).
Field Study Approach
The goal of this field study is to develop a general ABC implementation process for small
manufacturing firms that adheres to small business constraints. ABC systems were developed and
implemented in three small manufacturing companies. The operating characteristics of the
companies and their resulting ABC systems are presented and discussed.
Letters describing the research project were sent to 30 small (less than 100 employees)
manufacturing companies in Western Pennsylvania. Site visits were conducted at 10 of these
companies to assess feasible participation in the field study. Three companies were identified as
good candidates for implementing and benefiting from ABC. Each is involved in a highly
competitive business, has relatively high overhead costs, and their cost objects (products and jobs)
vary both in volume and complexity (Cooper, 1988a, 1988b). In addition, the owners and
managers at each company were willing to provide all necessary data and actively participate in
the implementation of the ABC system. The participating companies are described later in the
article. The ABC implementation process utilized at each company (see Exhibit 1) consists of four
phases (Needy et al., 2000) and is summarized below:
Phase 1-Cost System Evaluation
* Assess company commitment
* Assess current costing system
* Develop process plan
* Identify potential data sources
* Analyze financial statements
* Develop customer profile
* Develop fixed-to-variable ratio
Phase 2-ABC Design
* Identify functional requirements and objectives of an ideal costing system
* Develop functional specifications of the proposed system
* Identify activities and resources
* Identify cost drivers and establish cost pools
* Collect data
* Develop cost accumulation model
* Build a working prototype of the system using common spreadsheet software
* Compare product costs developed using the old and new costing system
Phase 3-ABC Implementation
* Evaluate system implementation alternatives
* Implement the system
Phase 4-System Evaluation and Validation
* Evaluate system and effect on strategic decision-making
* Evaluate resulting profitability
* Validate that system is working as intended
Case Studies
Company Background Information. Exhibit 2 presents basic information about the participating
companies. Company names have been changed to preserve anonymity.
Molder Inc.
Molder Inc., founded in 1957, is a manufacturer of precision custom injection molds. Molder Inc.
currently has 31 employees, 4 salaried and 27 hourly. In recent years, the company has set world
standards for the specification, design, and manufacture of precision injection molds. The injection
mold business is very competitive and customers expect the highest quality products. Companies
in this business typically compete on price and delivery time.
Prior to the ABC system implementation, Molder Inc. used traditional VBC to allocate overhead.
Various shop rates (for example, polishing, CNC milling, engineering, etc.) were developed. These
shop rates included an estimation of average labor cost as well as the allocation of overhead costs.
Bids were developed based on an estimation of process hours and material cost. The
management at Molder Inc. was concerned that this costing system did not accurately estimate
their product costs. In recent years, the business for precision custom injection mold has changed
considerably. Production costs have increased while expected lead times have decreased. This
phenomenon has caused Molder Inc.'s profitability to decrease in spite of increased company
sales. Molder Inc. has been unprofitable for the three years prior to this field study.
LiquidFill
LiquidFill was chartered in 1929 and operates to make a profit while listening to and pleasing its
customers. LiquidFill has 44 employees, 27 salaried and 17 hourly. Special liquid filling machines
that are custom designed and manufactured represent the majority of the company's new sales
dollars. Additional products, such as rotary cappers and rinsers, are sold through strategic
alliances with joint partners. Replacement parts and after-sales service contribute a significant
amount to company sales. LiquidFill sells to an international market and competes on price,
delivery, and after-sales service. Over the years, LiquidFill has shifted from a pure manufacturing
company to a manufacturing, marketing, and sales company.
Prior to the ABC system implementation, LiquidFill was allocating overhead on a volume basis
using direct labor hours as the cost driver. In addition to concerns about their previous system,
LiquidFill is concerned that their facility is too large, which is causing logistical and supervisory
problems. Due to high labor rates, a large portion of their product components is outsourced,
which is believed to have a negative effect on their bottomline. LiquidFill is attempting to shorten
the bidding process, which currently may take up to 14 months. With the exception of one year,
they has been unprofitable for five years prior to the field study.
Stamp Corporation
The Stamp Corporation, founded by three brothers in 1899, is a fourth-generation family-owned
business. The company produces and distributes high-value stamping equipment to varied
industries. This customized equipment ranges from heavyduty automatic stampers for industrial
printers to mainframe-- networked metal tag printers. Prior to ABC implementation, the Stamp
Corporation used a traditional volume-based costing method, where one overhead rate was
assigned to each department based on their consumed labor hours.
IMAGE CHART 26
Exhibit 1.
IMAGE TABLE 27
Exhibit 2.
In recent history, the company has noticed a decline in their market share, which may be partially
attributed to the decline in the steel industry. Management believes that most of their competitors
are single product manufacturers that benefit from economies of scale and therefore can offer
lower prices. The company has been unprofitable for the past five years.
Similarities and Dissimilarities among the Companies. The three companies that participated in the
field study have notable similar backgrounds. These similarities are listed below.
* They have been in business for a long time.
* They are small, highly specialized manufacturing companies.
* They know their customers personally.
* All are located in the Western Pennsylvania area.
* Their business is highly competitive.
* They have been unprofitable for some period of time in recent years.
* Managers believe that a radical reorganization is needed.
* Managers believe that intuition is not enough to survive in today's highly competitive environment.
* Managers have concerns regarding their current traditional costing systems.
* Their attitudes toward ABC system implementation are similar.
Cooper and Kaplan (1988b) suggest that most companies do not recognize that their traditional
costing systems provide unreliable and distorted cost information until their profitability and
competitiveness have deteriorated. This was true in all of the three companies that participated in
the field study. Most of the participating managers recognized that their traditional costing systems
were unable to deliver the reliable cost information necessary for making good decisions.
These managers also had similar attitudes toward ABC. Although managers at all three companies
expressed great interest in ABC implementation, they were not sure what could be gained by the
new systems and what they would have to invest during development and implementation. They
considered cost information to be primarily a basis for price setting, not decision-making. Thus,
using cost information to compare different production and process alternatives and for use in
strategic decision-making was not a motivation for implementing ABC.
This is unlike most large company managers who recognize ABC's ability to deliver more accurate
cost information when compared to VBC. These managers appreciate the benefits of ABC to
better manage cost and provide more reliable product pricing (Beaujon and Sighal, 1990; McGuire,
Kocakulah, and Dague, 1997). In large companies, accurate cost information is regarded as
crucial for good decision-making. The managers of these small companies were uncertain how to
utilize the new information obtained from ABC systems for decision-making. For example, what
changes should they make, if certain products, jobs, or customers are shown to be unprofitable.
In general, strategic planning in these small companies seems to be of less importance than in
their larger counterparts. This is exemplified by the fact that the participating upper-level managers
did not include strategic activities, such as creating strategic plans, managing the company, and
developing employees, when defining business activities at their companies. When the
researchers proposed these types of activities as missing, many of the managers considered them
to be redundant or non-value adding. This reflects a deficiency in small business strategic planning
as previously observed by other researchers (Schrader, Mulford, and Blackburn, 1989).
Customer Profile Comparison. Small businesses should not be viewed simply as scaled down
version of large companies with less sales revenue, employees, assets, and working capital. Small
businesses have their own specific business rules resulting from a condition referred to as
resource poverty. These conditions result in a different behavior of managers in small business
compared to large company managers (Welsh and White, 1981).
One unique characteristic of many small manufacturing firms is a skewed customer distribution. A
Pareto distribution often exists where a few primary customers (approximately 20%) generate a
large proportion of sales (approximately 80%) while the remaining customers account for a
relatively small portion of sales (Needy and Bidanda, 1995). The participants of the field study
exhibit this characteristic as shown in Exhibit 3.
The average percentage of customers accounting for 80% of sales is 22.93. When interviewed, the
managers of the participating companies expressed an awareness of this phenomenon and
viewed this skewed distribution negatively. They felt that their dependency on these primary
customers makes them vulnerable. Customers who know their strong position may use it to obtain
additional advantages, such as lower price or faster delivery, leading to a loss of profit for the
manufacturer.
Fixed vs. Variable Cost Comparison. Small manufacturing companies tend to have a high
proportion of fixed-to-variable costs where their costs only marginally vary with production (Needy
and Bidanda, 1995). This characteristic is important because high fixed costs can distort cost
information when overhead is allocated on a production volume basis such as direct labor hours.
IMAGE TABLE 39
Exhibit 3.
During the field study, the current cost structure of each company was examined. Financial data
were obtained from the previous two years' financial statements and verified during interviews with
the managers. Expenses such as rent, wages, administration, insurance, truck leasing, interest
expenses for long-term bank loans, and depreciation for equipment and buildings were regarded
as fixed costs. Expenses such as production materials, freight, office supplies, sales commissions,
travel, and entertainment were regarded as variable costs. Production wages were found to be
subject to moderate variation. The managers have some flexibility and are able to adjust this
expense category within some range to the production level. For instance, in times of high
production, the number of hours can be extended through the company's overtime policy. Because
of this, production wages were regarded as partially fixed and partially variable. The total fixed
costs for the participating companies, shown in Exhibit 4, are approximately 64%.
Since many variable expenses, such as utility bills, are needed to run a company's basic functions,
the practical level of fixed costs may be even higher. The cost structures found in this field study
confirm this high fixed-to-variable ratio, which is typical for small businesses. This high ratio of
fixed to variable cost combined with variation in sales and cash flows (Welsh and White, 1981)
restricts small manufacturers to limited financial freedom.
Process Flows. The process flow of each company was developed to identify all pertinent activities
within the company. All three process flows begin with a customer inquiry, which triggers the
gathering of specific information needed to develop a quote. Once this data collection is completed,
a quote is developed. The management of all three companies believes that their current bidding
processes represent an improvement opportunity. Quote development demands a large amount of
overhead resources, and due to low hit rates, only a few customer quotes result in an order being
placed. Occasionally the companies try to differentiate between serious customers who are likely
to place an order and those who are not. Less effort is invested in quote development where the
chance of obtaining an order is believed to be small; however, each company has observed that
they are often successful in bidding for orders that they regarded as not promising. Companies
often observe this symptom when only distorted cost information is available.
Once the customer order is placed and an initial payment is received, the production plan is
developed. Any necessary outsourcing decisions and necessary parts and raw materials orders
follow this. Supervision and production management are the next crucial steps in the process flows,
followed by final assembly and testing. Storage, product shipment, and, if necessary, on-site
installations are the final steps in the processes. In addition, all of the three companies
occasionally need to provide rework and warranty service.
Activities Comparison. The identification of activities is a crucial step in the ABC system
development process. The number of activities describing a company's business and
manufacturing processes affects both the effort in development, implementation, and maintenance
of the ABC system and the accuracy of the resulting cost information.
In the field study, activities were identified through extensive interviews with key personnel,
process flow analysis, and comparison to the literature. Examples of identified activities are as
follows: prepare a quote, plan the production, and purchase materials. Two criteria used to define
a task as an activity were its importance to the production and business processes and its
estimated consumption of overhead resources. Tasks that were deemed important to the
production and business processes and estimated to consume a relatively high amount of
overhead resources were identified as activities.
The results of the field study show that the complete business and manufacturing processes of a
small manufacturer can be comprehensively described with a manageably small number of
activities. Exhibit 5 shows the numbers of activities defined in each company.
The number of activities is crucial to the success of implementing ABC. An inappropriate number
of activities (usually too many) and unnecessarily complex systems are two pertinent factors
leading to difficulties during ABC system implementation (Roberts and Silvester, 1996).
Based on the field study results, the best approach to implementing ABC in a small company is to
start with a relatively small number of activities. If necessary, the accuracy of the system can be
improved later by introducing additional activities or by dividing existing activities into more refined
subactivities. For example, in one of the companies, the activity initially defined as "Contact
Customer" was identified as consuming a large proportion of the overhead resources. In addition,
not all products demanded the same intensity or type of resources dedicated to this activity. As a
result, the activity "Contact Customer" was divided into two separate sub-activities, "New Sales
Exploration" and "Customer Satisfaction Check" Cost Pool Development Comparison. After the
main activities were identified in each company, the costs of all activities were determined. Those
activity costs, in accordance with the ABC premise, are determined by their resource consumption.
The overhead cost for each activity is developed through the use of cost pools (Cooper, 1987a;
1987b). Once the costs of each activity are calculated, the overhead costs can then be traced to
the cost objects using appropriate cost drivers (Cooper, 1989a, 1989b). Exhibit 6 provides a few
examples of activities and cost drivers found during the field study.
Findings and Recommendation Comparison. The following is a list of existing problems found to
exist in all three of the participating companies at the conclusion of ABC implementation:
* Overall, their previous VBC systems were inaccurate as detailed in the next three bullets.
IMAGE TABLE 50
Exhibit 4.
IMAGE TABLE 51
Exhibit 5.
* The total costs for small jobs were generally underestimated.
* Medium-size jobs tended to be overestimated.
* The total cost for large jobs were mostly underestimated.
* They have problems with accounting for excess capacity.
* They are unhappy with their current outsourcing policies.
* They are unsatisfied with their current bid hit rates.
At the beginning of the field study, managers of all three companies expressed their dissatisfaction
with their current VBC systems. They were not able to determine where money was generated and
where it was wasted. After the necessary data was collected, ABC analyses were performed for
each company. The resulting ABC product costs were compared to the previous VBC costs, and
the resulting discrepancies were investigated.
Calculated costs for small jobs (according to sales dollars) and low volume batches were indicated
to be generally lower under VBC than ABC. This confirms the findings of other authors who
suggest that VBC tends to underestimate costs for small jobs that are consuming more overhead
resources per unit than high-volume jobs (Cooper and Kaplan, 1988a). Before the ABC
implementation, managers suspected that extremely small jobs were not profitable even though
their VBC systems stated otherwise. But they were unable to identify at which point were jobs too
small to be profitable. Costs for medium-size jobs were generally calculated higher under the VBC
systems than the ABC systems.
Most of the costs calculated for large jobs were found to be lower under the VBC systems than the
ABC systems. For all three companies, the results showed that profitability began to decrease at
certain job sizes. These findings were unexpected by the managers who believed that the larger-
sized jobs were the most profitable based on the previous product cost information provided by
their VBC systems. In the past, they often preferred one big job to two or three medium-size jobs.
Careful investigation showed that those large jobs often consumed an over-proportional amount of
overhead resources. For example, many of the large jobs required huge engineering time,
additional efforts in production preparation, material requirement, and production supervision.
These findings suggest that there may be jobs that are too large and resource demanding to be
profitable for all three of the companies. The total costs of large orders placed by large demanding
customers often tended to be higher than initially estimated. Large jobs can quickly exceed a small
manufacturer's production capacity and financial resources during order processing and lead to an
overall decrease in profitability in particular when resources are directed away from other smaller
jobs (Mariotti, 1996).
Findings of the Field Study. Findings of the field study indicate that small manufacturing firms, in
spite of existing differences in business processes and products, have many operating similarities
including a skewed customer distribution, high fixed-to-variable cost ratio, process flows, and
major activities. These similarities allow the establishment of a "typical" small manufacturer
template that can be used as a successful ABC implementation procedure.
IMAGE TABLE 63
Exhibit 6.
Before ABC can be successfully implemented in any small company, management needs to be
committed to ABC system implementation and to understand its advantages and the required
development effort. Management of the small company, often represented by a small number of
manager-- owners, has to support ABC initiation, provide feedback during development, and be
committed to using the resulting ABC information for making strategic decisions in order for ABC
implementation to be successful and beneficial.
When initiating ABC implementation in a small manufacturer, it is recommended that a relatively
simple system design include only a few activities and cost drivers. This inexpensive and efficient
methodology minimizes resource consumption, avoids frustration, and helps managers to easily
understand ABC development and results. If desired, the system can be further refined to increase
accuracy. For instance, additional activities may be introduced, cost drivers that better describe
resources may be identified, and newly collected data may replace estimated costs.
Conclusions
This research demonstrates the successful implementation of ABC systems at three small
manufacturing firms through the use of a cost and time efficient methodology, and seeks to
remedy the knowledge gap between ABC in small and large manufacturers. The major findings
can be summarized as follows:
* Small manufacturing companies need reliable and accurate cost information to survive.
* In cases where product diversity, high overhead costs, and a skewed customer distribution exist,
traditional VBC systems are unlikely to deliver accurate cost information to aid with price setting
and decision-making.
* ABC is a valuable management support tool for small manufacturers.
Recommendations
The findings of this field study confirm previous findings in the literature that small manufacturers,
even those that differ in business, products, and processes, have similar costing practices and
requirements. These similarities infer that a general ABC implementation procedure for small
manufacturers can be utilized and that ABC can provide these companies with accurate costing
information for strategic decision-making. Unfortunately, the financial and human resources
necessary for successful ABC implementation and maintenance often exceed small firms' financial
capacities. Thus we propose using an ABC system developed explicitly to meet the needs of the
small manufacturing firm, such as the system described in Exhibit 1. We have found that it is
possible, even with modest resources, for a small manufacturing company to undertake an ABC
implementation using this model.
Acknowledgment
The authors acknowledge the generous support of this research by the Society of Manufacturing
Engineers Education Foundation.
REFERENCE
References
REFERENCE
Baxendale, Sidney J., "Activity-based Costing for the Small Business," IEEE Engineering
Management Review, 29:3 (2001), pp.77-86.
Beaujon, George J., and Vinod R. Sighal, "Understanding the Activity Costs in an Activity-Based
Cost System," Journal of Cost Management (1990 Spring), pp. 51-72.
Benjamin, Colin O., Harshini P. Siriwardane, and Robert Laney, "Activity Based Costing in Small
Manufacturing Companies-The Theory/Practice Gap," Engineering Management Journal, 6:4
(December 1994), pp. 7-12.
Bharara, A., and Chung-Yee Lee, "Implementing of an Activity Based Costing System in a Small
Manufacturing Company," International Journal of Production Research, 34:4 (April 1996),
pp.1109-1130.
REFERENCE
Block, Stanley, "Capital Budgeting Techniques Used By Small Business Firms in the 1990s," The
Engineering Economist, 42:4 (1997), pp. 289-302.
Cooper, Robin, "The Two-Stage Procedure in Cost Accounting-Part One:' Journal of Cost
Management, 1:2 (Summer 1987a), pp. 43-51.
Cooper, Robin, "The Two-Stage Procedure in Cost Accounting-Part Two," Journal of Cost
Management, 1:3 (Fall 1987b), pp. 39-45.
Cooper, Robin, "The Rise of Activity Based Costing-Part One: What is an Activity-Based Cost
System?," Journal of Cost Management, 2:2 (Summer 1988a), pp. 45-54.
REFERENCE
Cooper, Robin, "The Rise of Activity Based Costing-Part Two: When Do I Need an Activity-Based
Cost System?" Journal of Cost Management, 2:3 (Fall 1988b), pp. 41-48.
Cooper, Robin, "The Rise of Activity Based Costing-Part Four: What Do Activity-Based Cost
Systems Look Like?," Journal of Cost Management, 3:1 (Spring 1989a), pp. 38-49.
Cooper, Robin, "The Rise of Activity Based Costing-Part Three: How Many Cost Drivers Do You
Need, and How Do You Select Them?," Journal of Cost Management, 2:4 (Winter 1989b), pp. 34-
46.
Cooper, Robin, and Robert S. Kaplan, "How Cost Accounting Distorts Product Costs:'
Management Accounting, (April 1988a), pp. 20-27.
REFERENCE
Cooper, Robin and Robert S. Kaplan, "Measure Cost Right: Make the Right Decisions," Harvard
Business Review, (Sept. 1988b-Oct. 1988b), pp. 96-102.
Cooper, Robin, and Robert S. Kaplan, "Profit Priorities from Activity Based Costing. Harvard
Business Review," (May 1991-June 30, 1991).
Gunasekaran, Angappa, H.B. Marri, and R.J. Grieve, "Activity Based Costing in Small and Medium
Enterprises," Computers er Industrial Engineering, 37:1 (1999), pp.407-411.
Gunasekaran, Angappa, Ronald McNeil, and Daljit Singh, "Activity-based Management in a Small
Company: A Case Study," Production Planning e'r Control, 11:4 (2000), pp.391-399.
REFERENCE
Gunasekaran, Angappa, and Dal)it Singh, "Design of Activitybased Costing in a Small Company: A
Case Study," Computers e'r Industrial Engineering, 37:1-2 (1999), pp. 413-416.
Hicks, Douglas T., "Yes, ABC Is For Small Business, Too," Journal of Accountancy, 188:2 (1999),
pp. 41-43.
Hicks, Douglas T., Activity Based Costing for Small and Mid-Sized Businesses: An Implementation
Guide, John Wiley & Sons (1992).
REFERENCE
Johnson, H. Thomas, "Activity Management: Reviewing the Past and Future of Cost
Management," Journal of Cost Management, 3:4 (Winter 1990), pp. 4-7.
Johnson, H. Thomas, "Activity-Based Management: Past, Present, and Future," The Engineering
Economist, 36.3 (Spring 1991), pp. 219-238.
Johnson, H. Thomas, Relevance Regained, The Free Press (1992). Johnson, H. Thomas, and
Robert S. Kaplan, Relevance Lost: The Rise and Fall of Management Accounting, Harvard
Business School Press (1987).
REFERENCE
Mariotti, John, "Beyond Activity Based Costing: Try Customer Based Profitability Accounting,"
Industry Week, 245:22 (December 2, 1996), p. 29.
McGuire, Brian L., Mahmed C. Kocakulah, and John W. Dague, "Using ABC to Identify Cost
Drivers in a Manufacturing Environment," Journal of Cost Management (September 1997-October
31, 1997), pp. 22-28.
Needy, Kim LaScola, and Bopava Bidanda, "Activity Based Costing for Small Manufacturers-A
Field Study," 4th Industrial Engineering Research Conference Proceedings (1995), pp. 628-634.
Needy, Kim LaScola, Bopaya Bidanda, and Mehmet Gulsen, "A
REFERENCE
Model to Develop, Assess, and Validate an Activity-based Costing System for Small
Manufacturers," Engineering Management Journal, 12:1 (2000), pp. 31-38.
REFERENCE
Roberts, Michael W., and Katherine J. Silvester, "Why ABC Failed and How It May Succeed,"
Journal of Cost Management, 9:4 (Winter 1996), pp. 23-35.
Roztocki, Narcyz, Jorge Valenzuela, Jose Porter, Robin Monk, and Kim LaScola Needy, "A
Procedure for Smooth Implementation of Activity Based Costing in Small Companies," American
Society of Engineering Management Conference Proceedings, (October 21-23, 1999), pp. 279-288.
REFERENCE
Schrader, Charles B, Charles L. Mulford, and Virginia L. Blackburn, "Strategic and Operational
Planning, Uncertainty, and Performance in Small Firms:' Journal of Small Business Management,
274 (October 1989), pp. 45-60.
Shields, Michael D., and Michael A. McEwen, "Implementing Activity Based Costing System
Successfully," Journal of Cost Management, 9:4 (Winter 1996), pp. 15-22.
Shim, Eunsup, and A. J. Stagliano, "A Survey of U.S. Manufacturers on Implementation of ABC,"
Journal of Cost Management (March/April 1997), pp. 39-41.
REFERENCE
Turney, Peter B.B., "Using Activity Based Costing to Achieve Manufacturing Excellence," Journal
of Cost Management, 3:2 (Summer 1989), pp. 23-31.
Villegas, Andres, Ana Maria Balderrama, Stelvio Di Cecco, and Pedro Caceres, "ABC Application
for an Engineering Company," Proceedings of the 1996 40th Annual Meeting of RACE
International (1996), pp. C&S/M&C.5.1C&S/S&C.5.10.
Welsh, John A., and Jerry F White, "A Small Business Is Not a Little Big Business," Harvard
Business Review, 59:4 (1981), pp. 18-27.
AUTHOR_AFFILIATION
Kim LaScola Needy, PE, University of Pittsburgh
Heather Nachtmann, University of Arkansas
Narcyz Roztocki, State University of New York at New Paltz
Rona Colosimo Warner, Rolls-Royce Corporation
Bopaya Bidanda, University of Pittsburgh
AUTHOR_AFFILIATION
About the Authors
AUTHOR_AFFILIATION
Kim LaScola Needy, PE, is an associate professor and undergraduate coordinator of industrial
engineering (IE) at the University of Pittsburgh. She received her BS and MS degrees in IE from
the University of Pittsburgh, and her PhD in IE from Wichita State University. She has obtained
nine years of industrial experience at PPG Industries and The Boeing Company. Her research
interests include activity-based costing, engineering economic analysis, engineering management,
and integrated resource management.
Heather Nachtmann is an assistant professor of IE at the University of Arkansas. She received her
PhD in IE from the University of Pittsburgh. Her research interests include economic decision
analysis, heuristic optimization, engineering valuation, and supply chain management. She is a
member of RACE International, ASEE, ASEM, lIE, INFORMS, and SWE.
Narcyz Roztocki is a professor of management information systems at the State University of New
York at New Paltz. He received his PhD in IE from the University of Pittsburgh. His research
interests include activity-based costing, economic value added systems and e-commerce.
AUTHOR_AFFILIATION
Rona Colosimo Warner is an operations director of combustion systems and 40-day engine
program director at Rolls-Royce Corporation. She received her MS in IE from the University of
Pittsburgh.
Bopaya Bidanda is the Ernest E. Roth Professor & Chairman of IE at the University of Pittsburgh.
In addition to his doctoral degree from PSU, be has industrial experience in manufacturing
systems, tools, and precision manufacturing. His research focuses on computer-integrated
manufacturing systems, robotic applications, automated data collection, and shared manufacturing.
Contact: Dr. Kim LaScola Needy, University of Pittsburgh, Department of Industrial Engineering,
1041 Benedum Hall, Pittsburgh, PA, 15261; phone: 412-624-9838; fax: 412-624-9831;
kneedy@engrng.pitt.edu
© Copyright American Society for Engineering Management Mar 2003
Provided by ProQuest Information and Learning. All rights Reserved.

You may not repost, republish, reproduce, package and/or redistribute the content of this page, in
whole or in part, without the written permission of the copyright holder.
Close Window
Copyright © 1999 - 2009 AllBusiness.com, Inc. All rights reserved.
Use of this site is governed by our Terms of Use Agreement and Privacy Policy.Copyright American Society for Engineering
Management Mar 2003© Engineering Management Journal 2010Provided by ProQuest, LLC. All rights Reserved.
You may not repost, republish, reproduce, package and/or redistribute the content of this page,
in whole or in part, without the written permission of the copyright holder.