Activity based costing (ABC)‎ a proposed costing model for phosphate industry : Jordan phosphate mines company as a case study

Other Title(s)

نظام المحاسبة تكاليف الأنشطة (ABC)‎ نموذج مقترح لصناعة الفوسفات : شركة مناجم الفوسفات الأردنية حالة دراسية

Dissertant

Irshidat, Marwan Said

Thesis advisor

Abd Allah, Khalid Amin

Comitee Members

Sayidah, Mansur Ibrahim
Hamdun, Talal
Abu Hassan, Abd al-Fattah

University

Arab Academy for Financial and Banking Sciences

Faculty

The Faculty of Banking and Financial Sciences

Department

Accounting Department

University Country

Jordan

Degree

Ph.D.

Degree Date

2005

English Abstract

This research paper aimed at replacing the current cost accounting system at Jordan Phosphate Mines Company (JPMC) in light of the encouraging benefits of Activity Based Costing (ABC) under the strong competitive challenges facing JPMC.

More accurate cost information results are obtained from ABC than from the traditional cost accounting systems, because ABC logic relies on the relationship of 'cause and effect' when allocating indirect costs rather than on only volume-based allocation.

The main standard of modern administrative systems in choosing a cost accounting system is the ability to give management more accurate figures that will assist management in facing challenges in the modern industrial environment.

The researcher assumed that this is attainable by adopting the ABC system.

Previous results of some ABC studies showed that implementing ABC usually led to reduction of costs and improved efficiency in production by decreasing non value added activities, which eventually led to increased competitiveness and profitability.

The researcher's approach in this dissertation was to present a summary of Management and Cost Accounting and to familiarize the reader with the theory of ABC, as well as to comment on the current cost accounting system applied at JPMC.

Traditional cost accounting systems have been under constant criticism due to the distortions in costing coming from the inability to accurately and fairly allocate indirect costs.

Advantages of ABC encouraged the researcher to propose an ABC Model for JPMC at minimal investment and risk.

Indirect costs constituted an increasing proportion of JPMC's production costs due to the majority of the production processes being automated.

This proposed ABC Model, made up of several sub-models, was linked together using Microsoft Excel, which the researcher saw as the appropriate customized tool to handle the unique requirements at JPMC and which could manage the huge amounts of data.

Most ready-made software programs are only for small companies.

As a result of the research, the researcher reached the conclusion that JPMC is able to implement ABC to replace the current cost accounting system.

JPMC can benefit much from ABC as a supportive management tool aiming to reach better decision-making, especially in pricing final products.

Also by introducing new concepts in modern systems, JPMC can begin to use a variety of analyses not currently present in the current cost accounting system.

The research concludes with setting up and training of an ABC team, along with discussing some other recommendations that call for possible new changes and requirements that may occur in case JPMC's management accepts the idea of possibly implementing the proposed ABC model in the future.

Even if implementation is not planned for the near future due to certain special circumstances facing JPMC, such as Early Retirement, Enterprise Resource Planning (ERP) and Privatization, the management of JPMC ought to keep the idea alive due to the numerous strategic benefits that ABC may provide.

Main Subjects

Financial and Accounting Sciences

Topics

• Cost accounting
• Costs
• Industries
• Jordan
• Phosphates

No. of Pages

173

Table of Contents

• APA
• MLA
• AMA

Language

English

Data Type

Arab Theses

Record ID

BIM-306790