Activity-Based Costing as a Cost Allocation Tool in the Digital Age: Enhancing Strategic Decision-Making
Keywords:
ABC, Artificial intelligence, Big data analyticsAbstract
Amidst a rapidly changing economy, Activity-Based Costing (ABC) has evolved with digital technologies, enhancing the strategic decision-making process through accurate cost allocation in management accounting. This study examines how digital technologies, such as big data and cloud computing, enhance the effectiveness of ABC in supporting competitive strategies, increasing profitability, and optimizing resource allocation. Leveraging a mixed-methods approach, the study combines quantitative analysis, case study analysis, and interviews. The quantitative analysis encompasses the adoption of ABC in manufacturing firms, while case study analysis focuses on the implementation of ABC and interviews with management accountants regarding the integration of ABC into strategic decision-making. The findings reveal improved accuracy with digital ABC systems, reducing accuracy errors by at least 25%, while the strategic decision-making process is increased by 40% and the profitability of the firms increased by 25%. However, despite the perceived benefits, high implementation costs and lack of specific skills persist, hindering the adoption. The study proposes a framework for synthesizing the integration of digital technologies, ABC, and strategic management, emphasising innovation and training. The study contributes to academic discourse by measuring the impact of digital ABC in strategic decision-making and capturing adoption challenges.
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