invetigating the Impact Drivers of the Activity-Based Costing (ABC) Technique on Performance Improvement and Cost Reduction at Iran Khodro Company

Document Type : Research

Authors
Mansoreh jafari 1
Karim Nakhaei 2
Habibollah Nakhaei 3
1 Department of Accounting, Zah.C, Islamic Azad University, Zahedan, Iran.
2 Assistant Professor, Department of Accounting and Finance, Birjand Branch, Islamic Azad university, Birjand, Iran.
3 Associate Professor, Department of Accounting and Finance, Birjand Branch, Islamic Azad university, Birjand, Iran.
10.22034/smajournal.2025.533993.1086
Abstract
In today's competitive environment, traditional costing systems are no longer able to provide accurate information on cost structures, highlighting the need for new costing approaches such as activity-based costing. This study aimed to identify and prioritize the drivers of successful ABC implementation and its impact on performance improvement and cost reduction in Iran Khodro Company. The research methodology of this study included a systematic literature review and content analysis to identify key variables, and then quantitative data collected through a standardized questionnaire from 120 experienced managers and experts of Iran Khodro Company. The data were analyzed using exploratory factor analysis, structural equation modeling, and importance-performance analysis. The results showed that six key drivers were identified, including senior management support, data-driven culture, IT infrastructure, employee participation, organizational commitment, and systems integration. Among them, IT infrastructure (β=0.48) and senior management support (β=0.41) had the highest impact on the implementation of the activity-based costing system. The findings also showed that effective implementation of activity-based costing can lead to improved organizational performance (β=0.59) and cost reduction (β=0.54). This research, while confirming the important role of activity-based costing in strategic decision-making, has presented a multidimensional model of the drivers of the implementation of this system in Iranian industrial environments. The results of this study can help managers of large companies to improve their accounting and management systems by identifying existing strengths and weaknesses.

Keywords

Subjects

Abeysekera, I., & Sharma, R. (2023). Activity-based costing technology adoption in Australian universities. Frontiers in Psychology, 14, 1168955.‏
https://doi.org/10.3389/fpsyg.2023.1168955
Borges, P., Alves, M. D. C., & Silva, R. (2024). The activity-based costing system applied in higher education institutions: a systematic review and mapping of the literature. Businesses, 4(1), 18-38. https://doi.org/10.3390/businesses4010002
‏ Chugh, Y., Sharma, S., Mehndiratta, A., Sharma, D., Garg, B., Prinja, S., & Guinness, L. (2024). Health care cost accounting in the Indian hospital sector. Health Policy and Planning, 39(7), 731-740. https://doi.org/10.1093/heapol/czae040
Campos-Bayardo, T. I., Román-Rojas, D., García-Sánchez, A., Cardona-Muñoz, E. G., Sánchez-Lozano, D. I., Totsuka-Sutto, S., ... & Miranda-Díaz, A. G. (2025). The role of TLRs in obesity and its related metabolic disorders. International Journal of Molecular Sciences, 26(5), 2229. https://doi.org/10.3390/ijms26052229
Cooper, R., & Kaplan, R. S. (1992). Activity-based systems: measuring the costs of resource usage. Accounting horizons, 6(3).‏ https://d1wqtxts1xzle7.cloudfront.net/62927832/63b83b5b321c404730c782468db3bf71a4da20200412-14926-12owpjq-libre.pdf?1586709273=&response-content-disposition=inline%3B+filename%3DActivity_Based_Systems_Measuring_the_Cos.pdf&Expires=1766861340&Signature=Dp7Rjm0WaLapfLTSndHaseg4pCPUS8WxrQ8j5Zg9mMY6Dq~O-LW3Sdpe901Xf7sq66DEG1LQHafUOfywkRDQLxx2W5~SdT0W~IoZypbYaHKZGWMl57zzIJzpv95W6EEHVhVTS3M34wuBTHxXTvN~Ka~kX5ishSnGsQ8r4TCfIHeqfvOuEhq5cAmQJyVR5bXwNaW47BFaP5J4Z7pSImtuwjQmK15CmBa~ki~qgUYMNDzSk~bX4nLiEtUBUZfUBh7SGxQ4UXdCmfQyZ~wciWojXXuUts0PiINjAo5lpTuS-RBkDoFIe50Nzyw701UYYIksMqwH20PXwxf19BYyS07noQ__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA
Datar, S., & Gupta, M. (1994). Aggregation, specification and measurement errors in product costing. Accounting Review, 567-591. https://www.jstor.org/stable/248432
Esmailikia, G., sabzalipour, F. and moradian, Z. (2025). The Perspective of the Implementation of Activity Based Costing in Public Sector Institutions: Investigating the Impact of the Current State of Deployment of the Costing System. Journal of Accounting and Social Interests, 14(4), 25-58. [In Persian] https://doi.org/10.22051/jaasci.2024.46084.1824
Faraji, O., Ezadpour, M., & Rabunavard, R. S. (2024). The role of managers' support in implementing activity-based costing system: Experimental method. Scientific journal of motaher auditing studies, 1(1), 69-87. [In Persian] https://masj.ihu.ac.ir/article_208346.html?lang=en
Gosselin, M. (1997). The effect of strategy and organizational structure on the adoption and implementation of activity-based costing. Accounting, organizations and society, 22(2), 105-122.‏ https://doi.org/10.1016/S0361-3682(96)00031-1
Kaplan, R. S., & Cooper, R. (1998). Cost and Effect: Using Integrated Cost Systems to Drive Profitability and Performance. Harvard Business Press https://books.google.com/books?hl=fa&lr=&id=SP4ziJkv3yQC&oi=fnd&pg=PR7&dq=Cost+and+Effect:+Using+Integrated+Cost+Systems+to+Drive+Profitability+and+Performance&ots=vir_dIu1Yr&sig=gyy-f6edA4tWxHRQX7BZw-KX6XI#v=onepage&q=Cost%20and%20Effect%3A%20Using%20Integrated%20Cost%20Systems%20to%20Drive%20Profitability%20and%20Performance&f=false
Kaplan, R. S., & Anderson, S. R. (2007). Time-driven activity-based costing: A simpler and more powerful path to higher profits . Harvard Business Press. https://books.google.com/books?hl=fa&lr=&id=k7LUVKYnFU8C&oi=fnd&pg=PR9&dq=Time-driven+activity-based+costing:+A+simpler+and+more+powerful+path+to+higher+profits&ots=hquQRq1UaO&sig=QoB5Wx1rnW0V4CqctQm1M8rMV5Q#v=onepage&q=Time-driven%20activity-based%20costing%3A%20A%20simpler%20and%20more%20powerful%20path%20to%20higher%20profits&f=false
Khademi, S., Heydari Shahna, A. and Mousavi, M. (2025). Calculation of the Full Cost of Education for Students in Various Disciplines at the AJA Command and Staff University (Activity-Based Costing Approach). Military Science and Tactics, 21(72), 91-123. [In Persian]
 https://doi.org/10.22034/qjmst.2025.2037483.2092
Kim, H. M., & Ramkaran, R. (2004). Best practices in e‐business process management: Extending a re‐engineering framework. Business process management journal, 10(1), 27-43. https://doi.org/10.1108/14637150410518310
Mehrabinia,R., Zarei, F. and Golmohammadi shoueaki,M. (2025). Improving Banking Services Based on Strategic Management Accounting Techniques. Strategic Management Accounting, 2(2), 43-61. [In Persian]  https://doi.org/10.22034/smajournal.2025.522926.1024
Neely, A. D., Adams, C., & Kennerley, M. (2002). The performance prism: The scorecard for measuring and managing business success (pp. 159-160). London: Prentice Hall Financial Times. https://d1wqtxts1xzle7.cloudfront.net/54855048/NM_Performance_Prism-libre.pdf?1509294300=&response-content-disposition=inline%3B+filename%3DThe_Performance_Prism_The_Scorecard_for.pdf&Expires=1766653338&Signature=hK8eASuz-~0msCVl9TxX7J3V48MRpJsbhz89cUDKxmsUGAXE67UfX9RzItDP8yokGTvkMOyuxDXt48deDG1UifPoW6LPpa~HHQV8kHPcV~55oL-w7YUbws2kbEq6kOQBtXlGif4h7qtl6bNjdNk-dISbRhPd7mRCArahWCsQCmqkxOg26R-xpu2nr5RGh8pVZiwQVxkAjRRB-sul2Z1xzGM2V3bctCwB6BDqceTkNig9QOTAyng6-AUabtzPVudOPK6dnH9f8dQszlthOdknZ-Xuo76tTxZtFRrngTHd3OZa4vLhCbbGPCxAe2me5iGKlArhv77gQR2mU~0lxmp4rw__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA
Nakhaei, K., Yazdifar, H., and Faghani, M., (2018), The Effect of Organizational Culture on Activity-Based Costing and Activity-Based Management, First National Conference on Research and Development in Management and Resistance Economics, Tehran, https://civilica.com/doc/787747/
Putri, A., Bastian, E., & Fitriyani, F. (2023). Activity Based Costing (ABC) on Company Performance with Competitive Advantage as A Variable Mediation. Journal of Applied Business, Taxation and Economics Research, 3(2), 150-163.‏
https://www.researchgate.net/publication/376182116_Activity_Based_Costing_ABC_on_Company_Performance_with_Competitive_Advantage_as_A_Variable_Mediation
Rahat Dahmardeh, H. and Shahnavazi, B. (2025). Explaining the Role Model of Target Costing in Improving the Financial Performance of Food Manufacturing Companies. Strategic Management Accounting, 2(3), 70-86. [In Persian]  https://doi.org/10.22034/smajournal.2025.532212.1063
Sotudeh,R. , Haghparast,A. and Hirad,A. (2025). Management Accounting and Resilience Economics Model for Sustainable Development of Manufacturing Companies. Strategic Management Accounting, 1(1), 40-64. [In Persian] https://doi.org/10.22034/smajournal.2025.511901.1003
Taticchi, P., Tonelli, F., & Pasqualino, R. (2013). Performance measurement of sustainable supply chains: A literature review and a research agenda. International Journal of Productivity and Performance Management, 62(8), 782-804. https://www.researchgate.net/profile/Flavio-Tonelli/publication/260002060_Performance_measurement_of_sustainable_supply_chains_A_literature_review_and_a_research_agenda/links/54945f650cf2ec133755a94b/Performance-measurement-of-sustainable-supply-chains-A-literature-review-and-a-research-agenda.pdf
Strategic Management Accounting
Volume 2, Issue 3
Autumn 2025
Pages 111-132