Chapter 2 Literature Review present literature review as the basis of research theories include: history of cost accounting system, history of ABC method, factors restricting to applicat
Trang 1MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY
HO CHI MINH CITY, 2016
Trang 2The thesis is completed at
HCMC University of Economics Science Instructors:
1 Associate professor, Ph.D Nguyen Xuan Hung
2 Ph.D Nguyen Ngoc Dung
Trang 3PREFACE
1 Rationale
According to the report of conference between the Prime Minister and enterprises on October 21st 2014, on the affect of global recession on the loss and bankruptcy of companies The report shows the objective causes of the global economy, and the weak ability of Vietnam enterprises to respond to changes The report supposes that it is necessary to add knowledge about cost control for managers Activity Based Costing -ABC is a preeminent method which helps enterprises increase operational efficiency and competitiveness
Study of factors preventing this method application is considered necessary and appropriate under the real condition of Vietnam However, ABC application in practice is very challenging To find out the factors preventing ABC application in practice and then give solutions is necessary aim of this thesis
1 Research aims and questions
The thesis aims at:
- Defining factors effecting negatively on ABC application at Vietnam’s enterprises
- Assessing impacts of factors on ABC application at Vietnam’s enterprises
To solve the first aim, research question is given as:
Which factors restrict ABC application at Vietnam’s enterprises?
To solve the second aim, research question is given as:
How negatively do these factors impact on ABC application at Vietnam’s enterprises?
2 Research object and scope
Object of the thesis is the factors impacting on ABC application and the level of impact Scope of the thesis is Vietnam’s enterprises operating on center-point provinces such as Ho Chi Minh City, Ha Noi, Da Nang, Binh Duong, Dong Nai, Tay Ninh, etc The thesis surveyed from January to October of 2015
3 Research method and contribution
To achieve the given aims, this thesis uses mixed method including qualitative survey and quantitative survey In the first period, qualitative survey is used to find out factors preventing ABC application in Vietnam’s enterprises In the second period, quantitative survey is used to calibrate the scale of regression model and assess the impact of each factor in this model to enterprises
The thesis has the following discoveries and contributions in theory and practice:
The thesis proves that there are nine factors impacting negatively on ABC application in Vietnam’s enterprises
In addition to contribution to theory, this thesis suggests some ideas to apply the method successfully in practice, and enhance the management efficiency distinctly
4 Thesis structure
Introduction Present the difficulty of Vietnam’s enterprises, the urgent requirement of ABC application to increase competitiveness of the enterprises Build the research aims and determine research questions to be the direction of the whole thesis
Chapter 1 Overview of research prevents the overview of the previous researches related to global and Vietnamese theses
Chapter 2 Literature Review present literature review as the basis of research theories include: history of cost accounting system, history of ABC method, factors restricting to application of this method in Vietnam’s enterprises Chapter 3 Research methodology presents the procedure of research, method of research, hypothesis construction and theory model establishment
Chapter 4 Research result presents the result of discussion with the experts, assessment of samples and data collection from preliminary and official research
Trang 4Chapter 5 Conclusion and recommendation present the significance of discoveries and give conclusion Based on the conclusion, give some recommendations to help the managers apply ABC in practice
CHAPTER 1: OVERVIEW OF RESEARCH
This chapter presents the trend of research of ABC method in the world Researches of ABC method in Vietnam are also referred and collected Based on the research results in the world and in Vietnam, research gap will be defined
1.1 Researches of activity based costing in the world
Researches of ABC method in the world are divided into two periods and have four opinions (Rong et al, 2009)
The first period studies the restrictions of traditional accounting system, recommendation of ABC method and there are two main opinions as follows:
- Comparison of product cost between traditional method and ABC method
- Comparison of cost distribution based on output criteria and not based on output criteria to explain the fluctuation of general production cost
The second period studies the implementation of ABC method, and there are two main opinions as
follows:
- Review of factors of success when implementing ABC
- Survey of this method’s application in practice
1.1.1 Study on weakness of traditional accounting and recommendation of ABC method
Miller and Vollman (1985) studies general production cost rate gradually covers a large percentage while employee cost and material cost decrease Traditionally, general production cost is collected and distributed according to the criteria of material and employee, not directly related to physical formation of products
According to Kaplan and Cooper (1988, 1998), cost system must do three functions as: Valuating inventory reflected in the financial statement, serving operational control, cost measurement for each object For cost measurement for each object, the system must estimate resource utilization for each product ABC method clarifies connection activities between revenue and resource utilization of the unit By highlighting the above relationship, managers work out exactly how to make profit for the unit
1.1.1 Studies of ABC method implementation in the world
Swenson (1995) studies the benefit of ABC method in production enterprises The finding shows that enterprises all have positive results when applying this method The companies says that production cost is improved and cost control becomes more efficient
Gosselin (1997) reviews from organization structure and business strategy to acceptation and implementation of activity management Study on activity management is divided into three levels: Study on activity analysis, cost analysis for each activity, and ABC method The result shows that companies with competition strategy, and centralized model accept ABC more easily than companies with decentralized model and without functional departments
Innes et al (2000) surveys the acceptation of ABC implementation and construction of standard model for ABC for 1,000 units The result shows that there is little positive signs in experience of ABC application There are many companies who give up implementation and are not concern with ABC method Besides, Innes supposes complicated technique and high cost restrict the implementation
Cotton et al (2003), in the study on ABC method in New Zealand, finds out that the difference of acceptation between New Zealand and the UK is support of leaders and active participation of accountants Companies which succeed in application decrease cost, valuate products more reasonably, assess result and give more improvement in management According to Cotton, the very high investment cost for this method restricts application in practice
In general, studies give the theory of ABC application in big enterprises However, the application result
in practice or the acceptation of enterprises is very limited Application in practice is far lower
1.2 Study on activity based cost in Vietnam
Trang 5According to theses at Ho Chi Minh City University of Economics, study on ABC is carried out after
2000, thesis with case study applied in several companies
Nguyen Thi Thu Hoan (2005) does case study of ABC to valuate products in Sai Gon Plastics Packaging Joint Stock Company The result helps leaders estimate exactly each product The study limits to the indirect costs allocated to the cost valuation, does not specify the cost for each activity according to the accounting book, identification of difficulties in applying ABC but no details
Nguyen Phong Nguyen (2005) combines ABC method with theory of constraints - TOC, for the aim of assessing application level of ABC and TOC in Vietnam The author also gives some limits when implementing ABC such as lack of software, lack of human resources, lack of technique but does not give arguments on this issue The author says that it is very hard to apply new method in Vietnam and support condition such as knowledge and managing ability are deficient
Nguyen Thi Bich Thuy (2009) studies on ABC application to support Activity - Based Management, ABM with the aim of deep study on ABC to estimate cost exactly and manage cost The study tries to allocate indirect cost to valuate, other indirect costs related to management and selling are not mentioned The author supposes that ABC issue is too new to be applied in Vietnam
Lam Thi Truc Linh (2010) studies on ABC method in ADC enterprise with the aim of applying new method in practice In the unit, there are many product families and support departments The result shows that cost valuation according to new method is different from traditional method However, the topic only allocates costs for valuation, other costs such as selling cost, indirect cost are not mentioned
Nguyen Thi Hoang Giang (2014) studies ABC method in Warek Furniture company with the aim of revaluating Giang (2014) carries out steps of cost allocation and revaluation, price of new products is different from current price However, Giang supposes that leaders must support and staff must be trained to apply this new method The author does not say the above issue in specific
Thus, studies on ABC in Vietnam are mainly to the extent of applying this method in practice, no systematic study of the impact of applying this method in practice, as well as the causes preventing the application in Vietnam
1.2 Gap of study on factors affecting ABC application in Vietnam’s enterprises
According to Douglas (2013), traditional accounting systems for cost in companies often have problem, cost is inexact and unreasonable to give decision The fact that ABC with its advantages gradually replace traditional method is inevitable (Manivannan, 2010)
According to Zhang and Che (2010) and Karim (2014), there are few studies on ABC for developing countries, especially rarely studies on problems or obstacles in applying in practice Based on the above studies,
it can be seen that studies on ABC application in practice is very few This represents a paradox about theory that new method is concerned but limited to be applied in practice, particularly in developing countries According to Huynh and Gong (2014), there are rarely studies on ABC in practice of Vietnam Besides, studies
on factors which prevents new method application in Vietnam’s enterprises systematically is limited This is the gap of knowledge about ABC in Vietnam
Summary of chapter 1
Chapter 1 presents the tendency of ABC method in the world, starting from the comparison between traditional accounting system with its disadvantages with new method In addition, this chapter also summarizes studies on this method in Vietnam Studies of Vietnam all suppose that ABC application in practice will have restriction but have not arranged systematically factors which affects on applying this method in enterprises This is the gap that the thesis finds out based on research overview and becomes the direction for next part of Chapter 2
CHAPTER 2: LITERATURE REVIEW
This chapter presents the brief history of cost system development, from traditional method formation to ABC method Necessary steps to implement ABC method from building aim, choosing groups and implementing techniques
Trang 62.1.Cost accounting system
2.1.1.Development process of cost accounting system
According to the development history, cost measurement system is designed through four periods
First period: Inappropriate information for financial statement
First period exists in new companies or experienced companies based on outdated theory and method Expression of cost accounting system in the first period:
- It takes much time to consolidate the statement of the whole company or close end-term ledger
- A lot of variances arising at the end of term, actual inventory value is not coherent with value in the ledger
Second period of the system: Direct to financial statement with characteristics:
- Achieving inquiry of establishing financial statements
- Gathering cost by responsibility center, but not by activity
However, the system has not provided the appropriate information for the primary purpose of
administration:
- Excluding costs of activities to calculate the profit for each product, service or customer
- Not providing useful information to improve business processes
Third period of the system: Adjustment, appropriateness with requirement of management,
separation
In the third period, the system keeps preparing financial statement for outside objects which is conform to standard, but provides appropriate information about the cost of activities, profit cost for each product However, in this period, the cost accounting system is developed into a separate system by some companies, have not linked to the operating system and sometimes information from the opposite system
Fourth period of the system: Consolidation of cost administration and financial statement
In the fourth period, information from ABC method and operational response system are consolidated and provided for setting out financial statement with the outside, ABC method provide support information of estimating resources across the unit
2.1.1.Limitation of cost accounting system in companies
According to Douglas (2013), cost accounting system in each company is particular However, these systems all have general limitations with the characteristics as follows:
Only one allocation ratio is used to allocate indirect costs across the company or apply the allocation rate for one product for all products or services
Company changes technology, production management does not change cost recognition accordingly Company has cost allocation principles influenced by outside reporting One characteristic of this limitation is the opinion that which products or services with high revenue must bear much cost
According to Douglas (2013), cost accounting systems in companies have many problems of cost recognition
Methods recognize that costs in companies are distorted and cost information for giving decision is untrustworthy
It is necessary to have a new recognition method that is ABC
2.1.3 From traditional cost accounting to activity-based cost method
Formation of traditional cost allocation
According to Kaplan’s study (1998), cost allocation is based on weight criteria from the 19th century with four important inventions about management First, the textile mill managers measured how much crude fiber each worker handles from cotton within one hour, and calculate the cost per one finished product Second, the managers in the field of rail measured cost success of each ton per mile for the entire system
with the particular characteristics of the field Third, Andrew Carnegie, steel mill manager, measured daily cost
Of materials, employees and energy used for steel mill Fourth, based on administration philosophy
of Frederick Taylor, managers measured amount of materials, employees and hours for each product
Trang 7Flexible standard and estimated cost system
This system was formed in the 20th century, developed by two Germans called Kilger and Plaut, and then popular in academic activities in the world Flexible standard and estimated cost system is based on two principles, one is building responsibility centers to focus on cost planning, cost control, product cost valuation
Upgrade and addition of standard cost system
GPK system has two major disadvantages as not providing timely information to managers and not providing enough information about the product The period of system improvement fixes the issue of providing information immediately, so the company give solution by connecting server to workstation The second problem, product information, is fixed by adding two measurement criteria of quality and delivery time
Kaizen cost system
Characteristics of Kaizen cost accounting system is information gathering to accelerate the process of cutting costs The information interesting Kaizen group is to update inventory circulation, used equipment, production area, production efficiency per hour, saving materials and substandard products The information about actual costs is updated for each group for their self-determination of cutting costs the most reasonably
Responsibility center for Pseudo profit
This system is carried out by that unit itself builds an easy-to-understand statement of business result Revenue is estimated by an amount of products multiplying the estimated selling price for external market, costs are aggregated from production cost of material and labor, arisen financial cost, waste product costs, allocated infrastructure cost, etc By estimating profit, managers will optimize what can be profitable such as utilizing excessive power, cutting waste product However, this system is unable to recognize cost of products exactly
2.2.Activity-based costing
2.2.1.Concept of activity-based costing
When studying on application and implementation of ABC, Douglas (1992, page 33) gives the concept as follows:
“Activity-based costing (ABC) method is a cost accounting concept based on the premise that products require an organization to perform activities and that those activities require an organization to incur costs In activity – based costing, system are designed so that any costs that cannot be attributed directly to a product flow into activities that make them necessary and that the cost of each activity then flows to the product(s) that make the activity necessary based on their respective consumption of that activity”
2.2.2 History of activity-based costing
Phase 1 Phase 2 Phase 3 Related to Indirect cost
and
variations
Relationship
of product and activity
Subclass of activity- product
Production activity and process
Production activity – entire business activity
Information of activity – management result
Approach Limited
range
Limited range
Limited range
Limited range Wide range Wide range
Focus on Product cost valuated
exactly
Product cost for decision
Product cost for strategic decision Cost strategy
Production process analysis
Fighting ability of enterprise
Consolidating solutions of activity result management
source: Moisello (2012) page 56
2.3 Steps of activity-based costing implementation
There are many studies on the procedure of ABC method Since Kaplan and Cooper (1988) built basic steps, next researchers all wanted to add more implementation steps with the aim of applying this new method in practice In general, technical steps to carry out ABC method as follows: (1) Develop objectives of implementation (2) Build group of
Trang 8implementation (3) Identify main activities (4) Charge for each activity (5) Determine the second allocation criteria
2.3.1 Develop objectives for ABC method implementation
According Adebayo (2006), when deciding to implement ABC method, managers need answer the following questions to establish implementation objectives: (1) What is primary motivation for implementing new method? (2) Which objectives is stated for implementing ABC method? And how to design in reality to comply with the statement of objectives? (3) How to make this method become an official function of the company? Or how to make external model become intrinsic needs of the company? (4) What is the real role of ABC method in the company?
2.3.2 Build group of implementation
Group of implementation need a leader who has knowledge of new method and management, accountant for data collection, several staff who know production or main activity of the unit, several other staff who will handle forms and documents to gather procedures and implementation steps for the group
2.3.3 Identify main activities
According to Turney (1996), description and identification of business activities is considered as the heart (main point of the entire ABC structural design) Dury (1996) defines activity as event, operation, a job with a specific purpose To identify activities, it can apply one of the following ways: building dictionary of activity,
functional analysis
2.3.4 Charge for each activity
After identifying activities, next step is calculation of cost for each activity based on the financial system or ledger (Kaplan and Cooper, 1998) This period is considered the first cost allocation During this period, resources will be calculated directly for each specific activity, or for various activities depending on the level of service
2.3.5 Determine the second allocation criteria
Criteria selection can be done by interviewing people who work frequently in this activity Kaplan and Cooper (1998) argues that there are three forms of allocation criteria
Profession based criteria
When applying this criteria, it just needs to count number of implementation to allocate
Time based criteria
This criteria uses time to assess activities Time based criteria will be more expensive than profession based criteria because it is necessary to calculate the length of time for each activity
Intensity based criteria
This criteria charges directly for each activity It should only be used when activities require to use special resources to implement
2.3.6 Allocate activity cost for final cost objects
According to Cooper (1990), ABC method is divided into two periods of cost allocation, the first period allocates from ledger to activities and the second period allocates from activity cost to each final cost object In the first period, cost is calculated by total cost dividing number of activities In the second period, based on times of activities to charge, times of using multiple fee of one activity by cost for that object
2.4 Factors affecting on activity-based costing application
2.4.1 Knowledge limitations of ABC
The first preventing factor is that knowledge limitation makes ABC approach not to be carried out This limitation shows that participants do not know benefits of ABC method, or understand the processes in the unit
to support implementation In addition, participants must understand theory of new method, and change the perception of information that accounting system brings
2.4.2 ABC Resource limitations affects on ABC design
Once being aware of the concept and benefits of the ABC method as the first obstacle, second, managers will perceive lack of resources for application The resource limitations are lack of time allocating staff in the project, lack of computer resources and budget for system design analysis, lack of good staff and experts in model development
Trang 92.4.3 Psychology of not wanting to change prevents ABC design and construction
Besides two above-mentioned obstacles, there is an important issue to consider, psychology of change resistance and new system receiving of the participants Expression of psychological resistance is to be afraid to change when taking part in implementation, suppose that theory of new method is two difficult, be scare of firing due to failure, be afraid of a huge amount of initial analysis data Thus, new method is considered to be competitive with the current management model, or self-view psychology realizes lack of the elements needed
to implement
2.4.4 Activity strategy affects on ABC selection
One of the decisive factors, which make an accounting system change to ABC, is strategy The activity strategy can affect use of ABC is direction to the valuation structure, advantage competition, new product development If the unit has not paid attention to this strategy, it will not want to implement ABC method
2.4.5 Affect of senior manager support
Support of senior managers is a key element, deciding the advantage in idea formation, analyzing and implementing ABC method Therefore, without manager support in the company, ABC implementation project will be almost stagnant or eliminated Sign of support lack is not to support resources for implementation, constantly change the participants, not to support solution of conflicts, not be tough enough to force departments taking part in
2.4.6 Limitations of implementation technique
Numerous studies in the first period of ABC method refers that technical issues is a major obstacle in application Related technical issues mentioned are to identify amount of activities reasonably, to include activities into groups, to select criteria for allocating costs, to charge for activities difficultly, software not meeting its aim, difficult to maintain the system, deficiency of data
2.4.7 Couching and training affects on ABC method
When studying obstacles of ABC application in enterprises, Moisello (2012) argues that factor of couching and training plays an important role Obstacles are represented as not considering training issue at the beginning, not considering consultancy of experts, not changing training program reasonably, non-constant train These issues prevent new method acceptation in practice
2.4.8 ABC organizational structure affects on ABC implementation
When implementing ABC, companies must re-design ICT system This changes power structure, therefore new method application will be affected if organizational structure does not change Signatures of unreasonable change of organizational structure are that power structure has not change appropriately, activity strategy has not changed, organizational structure has not been flexible, and culture has not opened to receive new things
2.4.9 Building target for each period with reward
According Adebayo (2006), companies participating ABC method usually include three types: passive because of competitive pressure, tendentiously imitating other companies to use this method and active because
of demand for system administrators When failing in implementation, each company has a specific reason Several companies only invest ABC method in compulsory form without investment of operating principles Some others do not divide targets for each period Some others do not build reward system leading to discourage the spirit of employees
2.4.10 Limitation of ABC application in enterprises
According to Martha (2014), this method limits practical application, expressed as follows: information users do not use ABC method, leaders are not interested in benefits of this method, at first the method is invested then is not used, the method is not used because of not serving for taxation, financial statement, the method is only studied but not applied, companies refuse to use models at the beginning
2.5 Background theory related to the thesis content
In order to be the basis for arguments of theories and hypotheses as well as variables constructed for theoretical models, some background theories are introduced as the basis of building arguments of the thesis
Trang 102.5.1 Behavioral theory
Behavioral theory is a subsystem of psychology It was born around the beginning of 20th century Behavioral theory initially studied human psychology, then expanded into administration behavior This theory studies psychological reactions of individuals in situations considered as threatening, fear, feeling responsible, feeling left back, feeling positive in front of benefits, or reacting to overcome fear Based on that, theory models
a sequence of psychological reactions from awareness to action Based on psychological studies, Gary (2012) and Brent (2012) described reaction of the staff involved in the ABC implementation project They started from the psychology of participation refusal, angriness and shock with changes, fear and confusion, to gradual acceptance and excitement
2.5.2 Theory of information system
According to Leo (1998), this theory starts from mid-1960s with the primary role of discussing about skills to choose right data and technical solutions of data processing In the second period, this theory focuses
on handling data sources, design and effective application of information system The third period starts from 1990s, this theory gradually interferes in management issues, studies on innovation of solutions for effective administration When studying on information theory, March and Smith (1995) and Shirlay (2002) argue that the awareness and behavior will be affected by information that people receive Therefore, when studying on how perception affects ABC use, Douglas (2013) and Mathar et al (2014) says there is a relationship between ABC theory awareness and decision to use this method in company
2.5.3 Theory of benefit and cost
Theory of benefit and cost starts in 1808 by Albert Gallantin mentioning in an irrigation project to compare benefit and cost Essentially, this theory studies the behavior of giving decision based on that benefit subtracts related cost of a project If the benefit is higher than the cost, the project will be chosen Based on the content of this theory, it can be seen that authors studied on ABC method based on this theory to argue for his viewpoint Adebayo (2006) says that it is necessary to consider the purpose of implementation and benefits of information from this method compared to cost before implementing
Summary of chapter 2
It can be seen that the development history of cost accounting originate from the industrial revolution Managers always want to estimate exactly cost for products and services in order to determine the effectiveness Traditional cost accounting was founded on the achievements of the labor cost calculation of fiber industry, distance conversion of railroad industry, material cost track of steel industry, and Taylor’s thought of spliting work Initially, traditional cost accounting met management demand However, as the production developed, this method was no longer appropriate and ABC was born ABC method is expected to be a new way for
managers to obtain effective information about the operation of the whole enterprise However, the application
in enterprise even leaves obstacle The obstacle is caused by: limited awareness, limited resources,
psychological obstacle, technical limitations, etc
CHAPTER 3: RESEARCH METHODOLOGY
Chapter 2 introduces factors which limit to apply ABC method in Vietnam’s enterprises Chapter 3 will present research methodology, research procedure, and build hypothesis and research model
3.1 Research methodology
3.1.1 Research methodology for the thesis
In chapter 1, the gap of thesis indicates that it is necessary to study on factors that limit the application of ABC method with specific characteristics in Vietnam’s enterprises, and to measure the impact of these factors For the purpose of this thesis, applying mixed methods and sequencing survey is appropriate Sequencing survey is conducted in two periods, the first period collects and explains qualitative data to find out factors that restrict the application of ABC method in Vietnam, the second period collecs and analyzes quantitative data to assess the impact of these factors on preventing ABC application in Vietnam
Trang 113.1.2 Research procedure
Research procedure has three major steps as follows:
Step 1: Study documents, establish research model, and design preliminary questionnaire
First target is determined as finding out factors which prevent ABC application in enterprises The thesis uses the first tool, researching related documents Previous related studies are aggregated and compared to find out factors that prevent ABC application This factor may not be suitable for unique characteristics of Vietnam’s enterprises so it should be discussed with the experts to adjust The answer of the experts were collected and compared to detect new factors not mentioned by theory At the end of the first period, factors preventing ABC application are built and calibrated to be appropriate with the situation of enterprises in Vietnam
Step 2: Preliminary research, scale adjustment, official questionnaire establishment
The second target is to measure these factors to assess their impact level Firstly, it is necessary to evaluate the reliability and value of the scale before the official assessment, in order to evaluate and calibrate the scales built in the first period for official survey Results are satisfactory variables, that questionnaire is officially established and is the basis of next step This step of survey is a part of the second period, quantitative analysis in sequencing survey strategy, the main part of the quantitative survey belongs to the official research step
Step 3: Official research, impact assessment of factors
After the preliminary survey of adjusted whole scale, some observed variables can be eliminated if inappropriate After the preliminary survey, a survey questionnaire is completed officially Number of surveys sent to the unit are 350 The results obtained from this step is the model of impact assessment of factors affecting ABC application in Vietnam’s enterprises
3.2 Building hypothesis, establishing research model and scale
3.2.1 Building hypothesis
Based on study of impact factors in 2.4, hypotheses of impact factors are built as follows:
H1: Awareness limitation of ABC prevents this method application
H2: Lack of resources affects on analysis and design of ABC
H3: Psychology of change restriction is the obstacle for analysis and design of ABC application
H4: Business strategy requiring ABC application has not been developed
H5: Lack of leadership support is the failure factor in ABC application in the units
H6: Limitations of application technique is the failure factor in ABC in the units
H7: Being unconcerned with training and couching affects much on ABC application
H8: The fact that organizational structure does not change appropriately limits ABC application
H9: Not building objectives for each period together with well-deserved reward prevents ABC application in practice
3.2.2 Theoretical model
Based on the above studies, ABC application in practice encounters a lot of obstacles Unsuccessful application of ABC in enterprises is impacted by 9 factors, including: (1) Awareness limitations (2) Lack of resources (3) Psychology of change limitation (4) No business strategy requiring ABC (5) Lack of leadership support (6) Limitation of application technique (7) No concern of training (8) Inappropriate change of organizational structure when applying ABC (9) No building objectives for each period together with well-deserved reward Research model are recommended as follows:
Y = a0 + a1X1 + a2X2 + a3X3 + a4X4 + a5X5 + a6X6 + a7X7 + a8X8 + a9X9 + e In that:
ai is called regression coefficient, or represents impact level of reason i to Y
e is considered as the balance of regression balance or impact level by other factors which are not found out
Trang 12Figure 3.2 Factors impacting on ABC application in Vietnam’s enterprises
3.2.3 Building scale in measurement model
Y- “Limitations of ABC application in Vietnam’s enterprises”
To measure for dependent variables, the research designs observed variables as follows:
Y1: Information user makes decision without information from ABC method
Y2: Leadership with no concern of ABC benefits
Y3: Investing at the beginning but no use afterwards
Y4: No use because of not serving tax, financial statement and auditing Y5: Do research
but do not apply
Y6: Refusing to use ABC
X1 – “Awareness limitation”
X1.1: No awareness of ABC benefits ABC
X1.2: No understandings of operating procedure of the company
X1.3: No understandings of ABC theory
X1.4: No proper awareness of the necessity of a good accounting system to make right decision X1.5: Benefit not commensurate with cost
X2 – “Lack of resources”
X2.1: Lack of time arranged for the staff
X2.2: Lack of resources of computers and support software
X2.3: Lack of implementation budget
X2.4: Lack of good experts, experienced accountants with ABC
X3 – “Psychology of change limitation”
X3.1: Being afraid of change impacts on ABC method building
X3.2: Theory of ABC is difficult
X3.3: Afraid of failure, being evaluated and fired
X3.4: Afraid of collection, processing big data at the beginning
X3.5: ABC method is considered to bring competitiveness rather than support for current programs X3.6: Self identification of resources lack without careful consideration affects ABC acceptation