Like any Costing System, for the successful implementation of Activity-Based-Costing System, we need to understand and ensure that the following critical factors in an organization are in existent:
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Characteristics of Successful ABC Implementations |
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(1) Strong Top Management Support |
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Without leadership from top management, some managers may not see any reason to change nor consider the ABC implementation as important.
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(2) Should Have Cross-Functional Involvement |
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ABC cannot be alone done by Finance or Costing Department. A well designed ABC system requires intimate knowledge of many parts of an organization hence involved those employees who have the in-depth working knowledge and those who ae familiar with the various parts of an organization’s operations.
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(3) ABC data should be linked to how people are evaluated and rewarded. |
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With the implementation of the ABC, it’s crucial that the evaluation of employee evaluation should derive from ABC data, it should not come out from other existing traditional costing system. Otherwise, this will send a wrong message that ABC data is unimportant and can even be ignored. |