Charotar University of Science & Technology

Indukaka Ipcowala Institute of Management

Activity Based Costing Adoption and Challenges In SMEs

23MBA032 Rutvik Dave

MB205- Costing and Control Systems
Introduction to ABC

 Activity-Based Costing is a method used to allocate costs accurately to the

products and services.
 What makes ABC different from other traditional costing methods is that it
assigns costs based on the specific activities that are involved in producing
each product or service.
 ABC is particularly useful in situations where overhead costs form a significant
portion of total costs, where there is a wide variety of products or services
with different resource consumption patterns, or where there is a need for
more accurate cost information for decision-making.
 Variety of Products/Services
and Integration problems with
ABC
Hypothesis:
H0: There is no significant association between
variety of products and integration problems
with ABC.
H1: There is a significant association between
variety of products and integration problems
with ABC.

 Interpretation:
Here, the p-value is 0.644 which is greater than 0.05 (we have taken
95%confidence level) therefore we fail to reject the null hypothesis and reject the
alternate hypothesis. Which proves that there is no significant association between
the given variables.
 Level of Production & High cost
of procurement as a barrier to
ABC adoption
Hypothesis:
H0: There is no significant association between
variety of products and integration problems
with ABC.
H1: There is a significant association between
variety of products and integration problems
with ABC.

 Interpretation:
Here, the p-value is 0.644 which is greater than 0.05 (we have taken
95%confidence level) therefore we fail to reject the null hypothesis and reject the
alternate hypothesis. Which proves that there is no significant association between
the given variables.
 Investigating the relationship
between pricing of
products/services and
analyzing profit margin
Hypothesis:
H0: There is no relationship between
importance of proper allocation of overheads
for ‘better pricing of products/ services’ and
‘analyzing profit margin’.
H1: There is a relationship between importance
of proper allocation of overheads for ‘better
pricing of products/ services’ and ‘analyzing
profit margin’.

 Interpretation:
There is High positive Correlation (association) between importance of proper allocation of
overheads for ‘better pricing of products/ services’ and ‘analyzing profit margin’.(r=
0.746). Here, the p-value is 0.000 which is less than 0.01 (we have taken 99%confidence
level) therefore we reject the null hypothesis and accept the alternate hypothesis. Which
proves that there is a relation between the given variables.(r= 0.746, p-value < 0.01)
Thank
You