Những nhân tố cản trở đến vận dụng phương pháp phân bổ chí phí ước tính theo mức độ hoạt động vào các doanh nghiệp việt nam (tt)

MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY

----o0o-----

BARRIERS TO APPLY ACTIVITY – BASED COSTING
METHOD (ABC) IN VIETNAMESE ENTERPRISES

Specialty: Accounting - Auditing Code:
62 34 03 01

SUMMARY OF DOCTORAL
DISSERTATION IN ECONOMICS

HO CHI MINH CITY, 2016


The thesis is completed at
HCMC University of Economics Science Instructors:
1. Associate professor, Ph.D. Nguyen Xuan Hung

2. Ph.D. Nguyen Ngoc Dung
Reviewer 1
..........
Reviewer 2
............
Reviewer 3
.........
The thesis will be defended at the council of the thesis assessment of
.....
At.....

The thesis can be further referred at the library: ...........


PREFACE
1. Rationale
According to the report of conference between the Prime Minister and enterprises on October 21st 2014, on
the affect of global recession on the loss and bankruptcy of companies. The report shows the objective causes of
the global economy, and the weak ability of Vietnam enterprises to respond to changes. The report supposes
that it is necessary to add knowledge about cost control for managers. Activity Based Costing -ABC is a
preeminent method which helps enterprises increase operational efficiency and competitiveness.
Study of factors preventing this method application is considered necessary and appropriate under the real
condition of Vietnam. However, ABC application in practice is very challenging. To find out the factors
preventing ABC application in practice and then give solutions is necessary aim of this thesis.

1. Research aims and questions
The thesis aims at:
- Defining factors effecting negatively on ABC application at Vietnam’s enterprises.
Assessing impacts of factors on ABC application at Vietnam’s enterprises.

-

To solve the first aim, research question is given as:
Which factors restrict ABC application at Vietnam’s enterprises?
To solve the second aim, research question is given as:
How negatively do these factors impact on ABC application at Vietnam’s enterprises?

2. Research object and scope
Object of the thesis is the factors impacting on ABC application and the level of impact. Scope of the
thesis is Vietnam’s enterprises operating on center-point provinces such as Ho Chi Minh City, Ha Noi, Da
Nang, Binh Duong, Dong Nai, Tay Ninh, etc. The thesis surveyed from January to October of 2015.

3. Research method and contribution
To achieve the given aims, this thesis uses mixed method including qualitative survey and quantitative
survey. In the first period, qualitative survey is used to find out factors preventing ABC application in
Vietnam’s enterprises. In the second period, quantitative survey is used to calibrate the scale of regression
model and assess the impact of each factor in this model to enterprises.
The thesis has the following discoveries and contributions in theory and practice:
The thesis proves that there are nine factors impacting negatively on ABC application in Vietnam’s
enterprises.
In addition to contribution to theory, this thesis suggests some ideas to apply the method successfully in
practice, and enhance the management efficiency distinctly.

4.

Thesis structure

Introduction Present the difficulty of Vietnam’s enterprises, the urgent requirement of ABC application to
increase competitiveness of the enterprises. Build the research aims and determine research questions to be the
direction of the whole thesis.
Chapter 1 Overview of research prevents the overview of the previous researches related to global and Vietnamese
theses.
Chapter 2 Literature Review present literature review as the basis of research theories include: history of cost
accounting system, history of ABC method, factors restricting to application of this method in Vietnam’s enterprises.
Chapter 3 Research methodology presents the procedure of research, method of research, hypothesis construction
and theory model establishment.

Chapter 4 Research result presents the result of discussion with the experts, assessment of samples and
data collection from preliminary and official research.

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Chapter 5 Conclusion and recommendation present the significance of discoveries and give conclusion.
Based on the conclusion, give some recommendations to help the managers apply ABC in practice.

CHAPTER 1: OVERVIEW OF RESEARCH
This chapter presents the trend of research of ABC method in the world. Researches of ABC method in
Vietnam are also referred and collected. Based on the research results in the world and in Vietnam, research gap
will be defined.

1.1 Researches of activity based costing in the world
Researches of ABC method in the world are divided into two periods and have four opinions (Rong et al,
2009).
The first period studies the restrictions of traditional accounting system, recommendation of ABC method
and there are two main opinions as follows:
- Comparison of product cost between traditional method and ABC method.
- Comparison of cost distribution based on output criteria and not based on output criteria to explain the
fluctuation of general production cost.
The second period studies the implementation of ABC method, and there are two main opinions as
follows:
- Review of factors of success when implementing ABC.
- Survey of this method’s application in practice.

1.1.1 Study on weakness of traditional accounting and recommendation of ABC method
Miller and Vollman (1985) studies general production cost rate gradually covers a large percentage while
employee cost and material cost decrease. Traditionally, general production cost is collected and distributed
according to the criteria of material and employee, not directly related to physical formation of products.
According to Kaplan and Cooper (1988, 1998), cost system must do three functions as: Valuating
inventory reflected in the financial statement, serving operational control, cost measurement for each object.
For cost measurement for each object, the system must estimate resource utilization for each product. ABC

method clarifies connection activities between revenue and resource utilization of the unit. By highlighting the
above relationship, managers work out exactly how to make profit for the unit.

1.1.1 Studies of ABC method implementation in the world
Swenson (1995) studies the benefit of ABC method in production enterprises. The finding shows that
enterprises all have positive results when applying this method. The companies says that production cost is
improved and cost control becomes more efficient.
Gosselin (1997) reviews from organization structure and business strategy to acceptation and
implementation of activity management. Study on activity management is divided into three levels: Study on
activity analysis, cost analysis for each activity, and ABC method. The result shows that companies with
competition strategy, and centralized model accept ABC more easily than companies with decentralized model
and without functional departments.
Innes et al (2000) surveys the acceptation of ABC implementation and construction of standard model for
ABC for 1,000 units. The result shows that there is little positive signs in experience of ABC application. There
are many companies who give up implementation and are not concern with ABC method. Besides, Innes
supposes complicated technique and high cost restrict the implementation.
Cotton et al (2003), in the study on ABC method in New Zealand, finds out that the difference of
acceptation between New Zealand and the UK is support of leaders and active participation of accountants.
Companies which succeed in application decrease cost, valuate products more reasonably, assess result and give
more improvement in management. According to Cotton, the very high investment cost for this method restricts
application in practice.
In general, studies give the theory of ABC application in big enterprises. However, the application result
in practice or the acceptation of enterprises is very limited. Application in practice is far lower.

1.2 Study on activity based cost in Vietnam.

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According to theses at Ho Chi Minh City University of Economics, study on ABC is carried out after

2000, thesis with case study applied in several companies.
Nguyen Thi Thu Hoan (2005) does case study of ABC to valuate products in Sai Gon Plastics Packaging
Joint Stock Company. The result helps leaders estimate exactly each product. The study limits to the indirect
costs allocated to the cost valuation, does not specify the cost for each activity according to the accounting
book, identification of difficulties in applying ABC but no details.
Nguyen Phong Nguyen (2005) combines ABC method with theory of constraints - TOC, for the aim of
assessing application level of ABC and TOC in Vietnam. The author also gives some limits when implementing
ABC such as lack of software, lack of human resources, lack of technique but does not give arguments on this
issue. The author says that it is very hard to apply new method in Vietnam and support condition such as
knowledge and managing ability are deficient.
Nguyen Thi Bich Thuy (2009) studies on ABC application to support Activity - Based Management,
ABM with the aim of deep study on ABC to estimate cost exactly and manage cost. The study tries to allocate
indirect cost to valuate, other indirect costs related to management and selling are not mentioned. The author
supposes that ABC issue is too new to be applied in Vietnam.
Lam Thi Truc Linh (2010) studies on ABC method in ADC enterprise with the aim of applying new
method in practice. In the unit, there are many product families and support departments. The result shows that
cost valuation according to new method is different from traditional method. However, the topic only allocates
costs for valuation, other costs such as selling cost, indirect cost are not mentioned.
Nguyen Thi Hoang Giang (2014) studies ABC method in Warek Furniture company with the aim of
revaluating. Giang (2014) carries out steps of cost allocation and revaluation, price of new products is different
from current price. However, Giang supposes that leaders must support and staff must be trained to apply this
new method. The author does not say the above issue in specific.
Thus, studies on ABC in Vietnam are mainly to the extent of applying this method in practice, no
systematic study of the impact of applying this method in practice, as well as the causes preventing the
application in Vietnam.

1.2 Gap of study on factors affecting ABC application in Vietnam’s enterprises
According to Douglas (2013), traditional accounting systems for cost in companies often have problem,
cost is inexact and unreasonable to give decision. The fact that ABC with its advantages gradually replace
traditional method is inevitable (Manivannan, 2010).

According to Zhang and Che (2010) and Karim (2014), there are few studies on ABC for developing
countries, especially rarely studies on problems or obstacles in applying in practice. Based on the above studies,
it can be seen that studies on ABC application in practice is very few. This represents a paradox about theory
that new method is concerned but limited to be applied in practice, particularly in developing countries.
According to Huynh and Gong (2014), there are rarely studies on ABC in practice of Vietnam. Besides, studies
on factors which prevents new method application in Vietnam’s enterprises systematically is limited. This is the
gap of knowledge about ABC in Vietnam.

Summary of chapter 1
Chapter 1 presents the tendency of ABC method in the world, starting from the comparison between
traditional accounting system with its disadvantages with new method. In addition, this chapter also summarizes
studies on this method in Vietnam. Studies of Vietnam all suppose that ABC application in practice will have
restriction but have not arranged systematically factors which affects on applying this method in enterprises.
This is the gap that the thesis finds out based on research overview and becomes the direction for next part of
Chapter 2.

CHAPTER 2: LITERATURE REVIEW
This chapter presents the brief history of cost system development, from traditional method formation to
ABC method. Necessary steps to implement ABC method from building aim, choosing groups and
implementing techniques.

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2.1.Cost accounting system
2.1.1.Development process of cost accounting system
According to the development history, cost measurement system is designed through four periods.
First period: Inappropriate information for financial statement
First period exists in new companies or experienced companies based on outdated theory and method.
Expression of cost accounting system in the first period:

- It takes much time to consolidate the statement of the whole company or close end-term ledger.
- A lot of variances arising at the end of term, actual inventory value is not coherent with value in the
ledger.
Second period of the system: Direct to financial statement with characteristics:
- Achieving inquiry of establishing financial statements
- Gathering cost by responsibility center, but not by activity.
However, the system has not provided the appropriate information for the primary purpose of
administration:
- Excluding costs of activities to calculate the profit for each product, service or customer.
- Not providing useful information to improve business processes.
Third period of the system: Adjustment, appropriateness with requirement of management,
separation.
In the third period, the system keeps preparing financial statement for outside objects which is conform to
standard, but provides appropriate information about the cost of activities, profit cost for each product.
However, in this period, the cost accounting system is developed into a separate system by some companies,
have not linked to the operating system and sometimes information from the opposite system.
Fourth period of the system: Consolidation of cost administration and financial statement
In the fourth period, information from ABC method and operational response system are consolidated
and provided for setting out financial statement with the outside, ABC method provide support information of
estimating resources across the unit.

2.1.1.Limitation of cost accounting system in companies
According to Douglas (2013), cost accounting system in each company is particular. However, these
systems all have general limitations with the characteristics as follows:
Only one allocation ratio is used to allocate indirect costs across the company or apply the allocation rate
for one product for all products or services.
Company changes technology, production management does not change cost recognition accordingly.
Company has cost allocation principles influenced by outside reporting. One characteristic of this
limitation is the opinion that which products or services with high revenue must bear much cost.
According to Douglas (2013), cost accounting systems in companies have many problems of cost

recognition.
Methods recognize that costs in companies are distorted and cost information for giving decision is
untrustworthy
It is necessary to have a new recognition method that is ABC.

2.1.3 From traditional cost accounting to activity-based cost method
Formation of traditional cost allocation
According to Kaplan’s study (1998), cost allocation is based on weight criteria from the 19th century with
four important inventions about management. First, the textile mill managers measured how much crude fiber
each worker handles from cotton within one hour, and calculate the cost per one finished product. Second, the
managers in the field of rail measured cost success of each ton per mile for the entire system
with the particular characteristics of the field. Third, Andrew Carnegie, steel mill manager, measured daily cost
Of materials, employees and energy used for steel mill. Fourth, based on administration philosophy
of Frederick Taylor, managers measured amount of materials, employees and hours for each product.
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Flexible standard and estimated cost system
This system was formed in the 20th century, developed by two Germans called Kilger and Plaut, and then
popular in academic activities in the world. Flexible standard and estimated cost system is based on two
principles, one is building responsibility centers to focus on cost planning, cost control, product cost valuation.
Upgrade and addition of standard cost system
GPK system has two major disadvantages as not providing timely information to managers and not
providing enough information about the product. The period of system improvement fixes the issue of providing
information immediately, so the company give solution by connecting server to workstation. The second
problem, product information, is fixed by adding two measurement criteria of quality and delivery time.
Kaizen cost system
Characteristics of Kaizen cost accounting system is information gathering to accelerate the process of
cutting costs. The information interesting Kaizen group is to update inventory circulation, used equipment,
production area, production efficiency per hour, saving materials and substandard products. The information

about actual costs is updated for each group for their self-determination of cutting costs the most reasonably.
Responsibility center for Pseudo profit
This system is carried out by that unit itself builds an easy-to-understand statement of business result.
Revenue is estimated by an amount of products multiplying the estimated selling price for external market,
costs are aggregated from production cost of material and labor, arisen financial cost, waste product costs,
allocated infrastructure cost, etc. By estimating profit, managers will optimize what can be profitable such as
utilizing excessive power, cutting waste product. However, this system is unable to recognize cost of products
exactly.

2.2.Activity-based costing
2.2.1.Concept of activity-based costing
When studying on application and implementation of ABC, Douglas (1992, page 33) gives the concept as
follows:
“Activity-based costing (ABC) method is a cost accounting concept based on the premise that products
require an organization to perform activities and that those activities require an organization to incur costs. In
activity – based costing, system are designed so that any costs that cannot be attributed directly to a product
flow into activities that make them necessary and that the cost of each activity then flows to the product(s) that
make the activity necessary based on their respective consumption of that activity”.

2.2.2 History of activity-based costing
Period
Related to

Period 1
Period 2
Phase 1
Phase 2
Phase 3
Indirect cost Relationship Subclass of Production
and

of
product activityactivity and
variations
and activity product
process

Approach

Limited
range

Focus on

Product cost valuated
exactly

Achieve

Limited
range

Exact cost accounting
system

Limited
range

Limited range

Period 3

Production activity Information
of
– entire business activity
–
activity
management result
Wide range

Product cost Product cost for
Cost strategy
for decision strategic decision
planning
ABM
Production
management process analysis
system

Period 4

Wide range
Building indexes
of activity result

Fighting ability of Consolidating
enterprise
solutions
of
activity
result

management

source: Moisello (2012) page 56
2.3 Steps of activity-based costing implementation
There are many studies on the procedure of ABC method. Since Kaplan and Cooper (1988) built basic steps, next
researchers all wanted to add more implementation steps with the aim of applying this new method in practice. In general,
technical steps to carry out ABC method as follows: (1) Develop objectives of implementation. (2) Build group of

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implementation. (3) Identify main activities. (4) Charge for each activity. (5) Determine the second allocation criteria.

2.3.1 Develop objectives for ABC method implementation
According Adebayo (2006), when deciding to implement ABC method, managers need answer the following
questions to establish implementation objectives: (1) What is primary motivation for implementing new method? (2)
Which objectives is stated for implementing ABC method? And how to design in reality to comply with the statement of
objectives? (3) How to make this method become an official function of the company? Or how to make external model
become intrinsic needs of the company? (4) What is the real role of ABC method in the company?

2.3.2 Build group of implementation
Group of implementation need a leader who has knowledge of new method and management, accountant
for data collection, several staff who know production or main activity of the unit, several other staff who will
handle forms and documents to gather procedures and implementation steps for the group.

2.3.3 Identify main activities
According to Turney (1996), description and identification of business activities is considered as the heart
(main point of the entire ABC structural design). Dury (1996) defines activity as event, operation, a job with a
specific purpose. To identify activities, it can apply one of the following ways: building dictionary of activity,
functional analysis.

2.3.4 Charge for each activity
After identifying activities, next step is calculation of cost for each activity based on the financial system or ledger
(Kaplan and Cooper, 1998). This period is considered the first cost allocation. During this period, resources will be
calculated directly for each specific activity, or for various activities depending on the level of service.

2.3.5 Determine the second allocation criteria
Criteria selection can be done by interviewing people who work frequently in this activity. Kaplan and
Cooper (1998) argues that there are three forms of allocation criteria.
Profession based criteria
When applying this criteria, it just needs to count number of implementation to allocate.
Time based criteria
This criteria uses time to assess activities. Time based criteria will be more expensive than profession
based criteria because it is necessary to calculate the length of time for each activity.
Intensity based criteria
This criteria charges directly for each activity. It should only be used when activities require to use
special resources to implement.

2.3.6 Allocate activity cost for final cost objects
According to Cooper (1990), ABC method is divided into two periods of cost allocation, the first period
allocates from ledger to activities and the second period allocates from activity cost to each final cost object. In
the first period, cost is calculated by total cost dividing number of activities. In the second period, based on
times of activities to charge, times of using multiple fee of one activity by cost for that object.

2.4 Factors affecting on activity-based costing application
2.4.1 Knowledge limitations of ABC
The first preventing factor is that knowledge limitation makes ABC approach not to be carried out. This
limitation shows that participants do not know benefits of ABC method, or understand the processes in the unit
to support implementation. In addition, participants must understand theory of new method, and change the
perception of information that accounting system brings.

2.4.2 ABC Resource limitations affects on ABC design
Once being aware of the concept and benefits of the ABC method as the first obstacle, second, managers
will perceive lack of resources for application. The resource limitations are lack of time allocating staff in the
project, lack of computer resources and budget for system design analysis, lack of good staff and experts in
model development.
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2.4.3 Psychology of not wanting to change prevents ABC design and construction
Besides two above-mentioned obstacles, there is an important issue to consider, psychology of change
resistance and new system receiving of the participants. Expression of psychological resistance is to be afraid to
change when taking part in implementation, suppose that theory of new method is two difficult, be scare of
firing due to failure, be afraid of a huge amount of initial analysis data. Thus, new method is considered to be
competitive with the current management model, or self-view psychology realizes lack of the elements needed
to implement.

2.4.4 Activity strategy affects on ABC selection
One of the decisive factors, which make an accounting system change to ABC, is strategy. The activity
strategy can affect use of ABC is direction to the valuation structure, advantage competition, new product
development. If the unit has not paid attention to this strategy, it will not want to implement ABC method.

2.4.5 Affect of senior manager support
Support of senior managers is a key element, deciding the advantage in idea formation, analyzing and
implementing ABC method. Therefore, without manager support in the company, ABC implementation project
will be almost stagnant or eliminated. Sign of support lack is not to support resources for implementation,
constantly change the participants, not to support solution of conflicts, not be tough enough to force
departments taking part in.

2.4.6 Limitations of implementation technique

Numerous studies in the first period of ABC method refers that technical issues is a major obstacle in
application. Related technical issues mentioned are to identify amount of activities reasonably, to include
activities into groups, to select criteria for allocating costs, to charge for activities difficultly, software not
meeting its aim, difficult to maintain the system, deficiency of data.

2.4.7 Couching and training affects on ABC method
When studying obstacles of ABC application in enterprises, Moisello (2012) argues that factor of
couching and training plays an important role. Obstacles are represented as not considering training issue at the
beginning, not considering consultancy of experts, not changing training program reasonably, non-constant
train. These issues prevent new method acceptation in practice.

2.4.8 ABC organizational structure affects on ABC implementation
When implementing ABC, companies must re-design ICT system. This changes power structure,
therefore new method application will be affected if organizational structure does not change. Signatures of
unreasonable change of organizational structure are that power structure has not change appropriately, activity
strategy has not changed, organizational structure has not been flexible, and culture has not opened to receive
new things.

2.4.9 Building target for each period with reward
According Adebayo (2006), companies participating ABC method usually include three types: passive
because of competitive pressure, tendentiously imitating other companies to use this method and active because
of demand for system administrators. When failing in implementation, each company has a specific reason.
Several companies only invest ABC method in compulsory form without investment of operating principles.
Some others do not divide targets for each period. Some others do not build reward system leading to
discourage the spirit of employees.

2.4.10 Limitation of ABC application in enterprises
According to Martha (2014), this method limits practical application, expressed as follows: information
users do not use ABC method, leaders are not interested in benefits of this method, at first the method is
invested then is not used, the method is not used because of not serving for taxation, financial statement, the

method is only studied but not applied, companies refuse to use models at the beginning.

2.5 Background theory related to the thesis content
In order to be the basis for arguments of theories and hypotheses as well as variables constructed for
theoretical models, some background theories are introduced as the basis of building arguments of the thesis

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2.5.1 Behavioral theory
Behavioral theory is a subsystem of psychology. It was born around the beginning of 20th century.
Behavioral theory initially studied human psychology, then expanded into administration behavior. This theory
studies psychological reactions of individuals in situations considered as threatening, fear, feeling responsible,
feeling left back, feeling positive in front of benefits, or reacting to overcome fear. Based on that, theory models
a sequence of psychological reactions from awareness to action. Based on psychological studies, Gary (2012)
and Brent (2012) described reaction of the staff involved in the ABC implementation project. They started from
the psychology of participation refusal, angriness and shock with changes, fear and confusion, to gradual
acceptance and excitement.

2.5.2 Theory of information system
According to Leo (1998), this theory starts from mid-1960s with the primary role of discussing about
skills to choose right data and technical solutions of data processing. In the second period, this theory focuses
on handling data sources, design and effective application of information system. The third period starts from
1990s, this theory gradually interferes in management issues, studies on innovation of solutions for effective
administration. When studying on information theory, March and Smith (1995) and Shirlay (2002) argue that
the awareness and behavior will be affected by information that people receive. Therefore, when studying on
how perception affects ABC use, Douglas (2013) and Mathar et al (2014) says there is a relationship between
ABC theory awareness and decision to use this method in company.

2.5.3 Theory of benefit and cost

Theory of benefit and cost starts in 1808 by Albert Gallantin mentioning in an irrigation project to
compare benefit and cost. Essentially, this theory studies the behavior of giving decision based on that benefit
subtracts related cost of a project. If the benefit is higher than the cost, the project will be chosen. Based on the
content of this theory, it can be seen that authors studied on ABC method based on this theory to argue for his
viewpoint. Adebayo (2006) says that it is necessary to consider the purpose of implementation and benefits of
information from this method compared to cost before implementing.

Summary of chapter 2
It can be seen that the development history of cost accounting originate from the industrial revolution.
Managers always want to estimate exactly cost for products and services in order to determine the effectiveness.
Traditional cost accounting was founded on the achievements of the labor cost calculation of fiber industry,
distance conversion of railroad industry, material cost track of steel industry, and Taylor’s thought of spliting
work. Initially, traditional cost accounting met management demand. However, as the production developed,
this method was no longer appropriate and ABC was born. ABC method is expected to be a new way for
managers to obtain effective information about the operation of the whole enterprise. However, the application
in enterprise even leaves obstacle. The obstacle is caused by: limited awareness, limited resources,
psychological obstacle, technical limitations, etc.

CHAPTER 3: RESEARCH METHODOLOGY
Chapter 2 introduces factors which limit to apply ABC method in Vietnam’s enterprises. Chapter 3 will
present research methodology, research procedure, and build hypothesis and research model.

3.1 Research methodology
3.1.1 Research methodology for the thesis
In chapter 1, the gap of thesis indicates that it is necessary to study on factors that limit the application of
ABC method with specific characteristics in Vietnam’s enterprises, and to measure the impact of these factors.
For the purpose of this thesis, applying mixed methods and sequencing survey is appropriate. Sequencing
survey is conducted in two periods, the first period collects and explains qualitative data to find out factors that
restrict the application of ABC method in Vietnam, the second period collecs and analyzes quantitative data to
assess the impact of these factors on preventing ABC application in Vietnam.

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3.1.2 Research procedure
Research procedure has three major steps as follows:
Step 1: Study documents, establish research model, and design preliminary questionnaire.
First target is determined as finding out factors which prevent ABC application in enterprises. The thesis
uses the first tool, researching related documents. Previous related studies are aggregated and compared to find
out factors that prevent ABC application. This factor may not be suitable for unique characteristics of Vietnam’s
enterprises so it should be discussed with the experts to adjust. The answer of the experts were collected and
compared to detect new factors not mentioned by theory. At the end of the first period, factors preventing ABC
application are built and calibrated to be appropriate with the situation of enterprises in Vietnam.
Step 2: Preliminary research, scale adjustment, official questionnaire establishment.
The second target is to measure these factors to assess their impact level. Firstly, it is necessary to
evaluate the reliability and value of the scale before the official assessment, in order to evaluate and calibrate
the scales built in the first period for official survey. Results are satisfactory variables, that questionnaire is
officially established and is the basis of next step. This step of survey is a part of the second period, quantitative
analysis in sequencing survey strategy, the main part of the quantitative survey belongs to the official research
step.
Step 3: Official research, impact assessment of factors
After the preliminary survey of adjusted whole scale, some observed variables can be eliminated if
inappropriate. After the preliminary survey, a survey questionnaire is completed officially. Number of surveys
sent to the unit are 350. The results obtained from this step is the model of impact assessment of factors
affecting ABC application in Vietnam’s enterprises.

3.2 Building hypothesis, establishing research model and scale
3.2.1 Building hypothesis
Based on study of impact factors in 2.4, hypotheses of impact factors are built as follows:
H1: Awareness limitation of ABC prevents this method application.
H2: Lack of resources affects on analysis and design of ABC.

H3: Psychology of change restriction is the obstacle for analysis and design of ABC application.
H4: Business strategy requiring ABC application has not been developed.
H5: Lack of leadership support is the failure factor in ABC application in the units.
H6: Limitations of application technique is the failure factor in ABC in the units.
H7: Being unconcerned with training and couching affects much on ABC application.
H8: The fact that organizational structure does not change appropriately limits ABC application.
H9: Not building objectives for each period together with well-deserved reward prevents ABC application in
practice.

3.2.2 Theoretical model
Based on the above studies, ABC application in practice encounters a lot of obstacles. Unsuccessful
application of ABC in enterprises is impacted by 9 factors, including: (1) Awareness limitations. (2) Lack of
resources. (3) Psychology of change limitation. (4) No business strategy requiring ABC. (5) Lack of leadership
support. (6) Limitation of application technique. (7) No concern of training. (8) Inappropriate change of
organizational structure when applying ABC. (9) No building objectives for each period together with welldeserved reward. Research model are recommended as follows:
Y = a0 + a1X1 + a2X2 + a3X3 + a4X4 + a5X5 + a6X6 + a7X7 + a8X8 + a9X9 + e In that:
ai is called regression coefficient, or represents impact level of reason i to Y.
e is considered as the balance of regression balance or impact level by other factors which are not found
out.

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Figure 3.2 Factors impacting on ABC application in Vietnam’s enterprises

3.2.3 Building scale in measurement model
Y- “Limitations of ABC application in Vietnam’s enterprises”
To measure for dependent variables, the research designs observed variables as follows:
Y1: Information user makes decision without information from ABC method.
Y2: Leadership with no concern of ABC benefits

Y3: Investing at the beginning but no use afterwards.
Y4: No use because of not serving tax, financial statement and auditing. Y5: Do research
but do not apply
Y6: Refusing to use ABC
X1 – “Awareness limitation”
X1.1: No awareness of ABC benefits ABC.
X1.2: No understandings of operating procedure of the company
X1.3: No understandings of ABC theory
X1.4: No proper awareness of the necessity of a good accounting system to make right decision.
X1.5: Benefit not commensurate with cost.
X2 – “Lack of resources”
X2.1: Lack of time arranged for the staff
X2.2: Lack of resources of computers and support software.
X2.3: Lack of implementation budget.
X2.4: Lack of good experts, experienced accountants with ABC.
X3 – “Psychology of change limitation”
X3.1: Being afraid of change impacts on ABC method building.
X3.2: Theory of ABC is difficult.
X3.3: Afraid of failure, being evaluated and fired.
X3.4: Afraid of collection, processing big data at the beginning.
X3.5: ABC method is considered to bring competitiveness rather than support for current programs.
X3.6: Self identification of resources lack without careful consideration affects ABC acceptation
10


X4 – “No business strategy requiring ABC”
X4.1: No strategy of cost structure change, direction to valuation, no ABC application.
X4.2: No strategy of advantage competitiveness, no ABC application.
X4.3: No strategy of new product and market development, no concern of ABC.
X5 – “Lack of leadership support”

X5.1: No support of resources for ABC implementation.
X5.2: Individual change in implementation group.
X5.3: No support of conflict solution among departments.
X5.4: Not being tough to force departments to participate
X6 – “Limitation of application technique”
X6.1: Being hard to identify number of reasonable activities for appropriate information supply.
X6.2: Being hard to identify and merge activities into groups.
X6.3: Being hard to select criteria of allocation.
X6.4: Charge of activity.
X6.5: Support software does not meet the objectives.
X6.6: Being hard to maintain ABC system for frequent update of activities in companies.
X6.7: Deficiency of data to use software of implementation support.
X7 – “No concern of training”
X7.1: No consideration of training and couching issue at the beginning restricts ABC implementation.
X7.2: Expert’s support is not considered when implementing
X7.3: No change of training process to be suitable for each step of ABC method.
X7.4: Non-constant training and couching even when applying ABC successfully.
X8 –“Inappropriate change of organizational structure when applying ABC”
X8.1: Power structure does not change in accordance with periods of ABC application.
X8.2: Operational strategy does not change when ABC is considered to be applied.
X8.3: Organizational structure is not flexible to apply ABC.
X8.4: Company culture is not ready to receive new thing so it is impossible to implement ABC.
X9 – “No building objectives for each period together with well-deserved reward”.
X9.1: Form is invested more than principle.
X9.2: No building each step of implementation and specific objectives.
X9.3: No building reward system for each objective to encourage the staff.

3.2.4 Questionnaire design
In this thesis, there are two questionnaire, one for discussion with experts (qualitative survey), and one for
preliminary investigation (quantitative survey). For questionnaire for discussion with experts, its objective is to

collect additional opinions of factors which prevent ABC application in Vietnam’s enterprises. Questions in this
qualitative survey are open, in order to collect experts’ opinions.
Based on the above discussion result, structural questionnaire is used to collect data by preliminary
investigation and official investigation in quantitative analysis. Its objective is to collect data for reliability
evaluation and measuring value of scale in preliminary investigation. After evaluating preliminary investigation
result, official questionnaire is used to collect data for regression model inspection to assess impact level of
mentioned factors in suggested theoretical model.

Summary of chapter 3
Chapter 3 presents mixed method by sequencing survey that the thesis chooses to achieve the initial objectives.
In the period of qualitative survey, background theoretical survey tool is used to consider related researches in
order to build impact factors. To determine if factors are suitable for Vietnam characteristics, case study and
interview with experts will be implemented to add and discover new factors. At the end of this period,
theoretical model is built. Inspection is divided into two steps, preliminary inspection and official inspection.
This is the main content of next chapter.

11


CHAPTER 4: RESEARCH RESULT
This chapter focuses on solving main issues of the research as follows: (1) Presenting investigation result
with experts. (2) Presenting preliminary investigation result to inspect scale. (3) Present official investigation
including introduction of samples, methodology, and subjects. (4) Inspecting CFA (Confirmatory Factor
Analysis) to examine the appropriateness of scale in official research. (5) Inspect regression model to evaluate
theoretical model.

4.1 Investigation result with experts
4.1.1 About factors affecting on ABC application
Experts all unify that there are nine factors preventing ABC application in Vietnam’s enterprises,
similar to researched theoretical model. Impact level will be revaluate by data collecting in the official

investigation presented in the next part.

4.1.2 About scale assessing ABC application limitation
Scale of factors and expression of ABC limitation agree about way of assessment. This result is the basis
of building preliminary questionnaire to assess and inspect the scale in next steps.
4.2. Preliminary investigation
4.2.1. Description of preliminary investigation
The number of questionnaires sent by the accounting firms is 180; the number of responses to the questionnaires
is 180, 161 of them are valid and 19 of them are invalid vacant due to not giving answers to many questions.
Survey period is from January 2015 to May 2015.
In terms of activity type, among 161 companies involved in the survey, there are 71 manufacturing companies
(44.1%), 37 companies engaged in commercial activities (23%), 43 service companies (26.7%), 6 construction
companies (3.7%) and 4 agricultural, forestry and fishery companies (2.5%).
Currently, 43 companies are using the output criteria to allocate the cost, accounts for 26.7%. 44 companies are
using the material value criteria as a basis for the cost allocation, accounting for 27.3%. 34 companies are using
the workforce criteria to allocate the cost, accounting for 21.1%. 28 companies are using the time for operating
machine as the criterion for distribution, accounting for 17.4%. 12 companies are using other criteria for the
cost allocation, accounting for 7.5%.
The result is that 4 respondents are very satisfied with the applied criterion, accounting for 2.5%. 83 people
reply that they are satisfied, accounting for 51.6%. 67 respondents are not pleased with the current criterion,
accounting for 41.6%. 7 people are dissatisfied with the criteria for the cost allocation, accounting for 4.3%.
4.2.2. Assessment of reliability of the scale
The criteria for the scale assessment need require 2 following conditions:
- Cronbach's alpha coefficient is greater than 0.6
- Corrected Item-Total Correlation is greater than 0.3
The result shows that the variables that do not fulfill the requirements include Y3, X2.1, X3.6, X5.2, X6.7,
X7.2.
4.2.3. Scale value assessment - Exploratory factor analysis
It is necessary to assess the value of scale including convergent value and distinct value, Exploratory Factor
Analysis (EFA) is used to evaluate the two values.

To use the method of EFA, we have to consider two necessary conditions involving samples and Kaiser - Meyer
- Olkin index (KMO). Normally, KMO index ranging from 0.5 to 1 is the sufficient condition for the factor
analysis. Besides, it is necessary to check an additional condition that is the Bartlett index, this test helps
determine if KMO indicators or statistical significance. For KMO to meet the standard, sig value of Bartlett
need to be less than 0.05 for statistical significance.

12


KMO and Bartlett's Test
Kaiser-Meyer-Olkin

Measure of Sampling Adequacy.

Bartlett's Test of Sphericity

.759

Approx. Chi-Square

5032.972

Df

595

Sig

.000

The result shows that Eigen value reaches 1.064, which is greater than 1 with 9 factors is reasonable
compared to the given model. The addition of the 10th factor will turn this value into 0.985, which is less than
1, violating the given condition.
The collect value of the Total Variance Explained is 0.76817, which is greater than 0.5. This means the given 9
factors can explain 76.817% of the variation of data.
4.3. Official investigation
4.3.1. Descriptive statistics of formal investigation
The purpose of the research is to focus on the enterprises operating in Vietnam. The total of enterprises was
448,000 (quoted from the source of General Statistics Office, 2012). Surveyed elements were enterprises customers of the auditing firms that own a stable accounting apparatus and always desire for a better accounting
information system. Subjects that were given the questions include chief accountants, general accountants, and
financial directors of the enterprises.
The quantity of questionnaires was 350. The period for survey was from June 2015 to October 2016. The collect
results were 320 responses, 317 of which were valid. The next step was entering the data in Excel to conduct the
adjustment of data, and the edited data will be input in the SPSS 20 for the statistics.
Of the 317 valid votes, there are 154 manufacturing enterprises accounting for 48.6%, 72 commercial
enterprises accounting for 22.7% and 66 services business accounting for 20.8%, respectively, 66 companies
and 15 construction enterprises and 10 companies operating in the agricultural and fishery sectors accounting
for 4.7% and 3.2% of the sampling structure.
4.3.2. Verification of CFA
Confirmatory Factor Analysis is used to evaluate whether the variables included in the model fit the actual data
or not. This is a form of general assessment of variables, which is essential to the evaluation of regression mode
4.3.2.1. Check on the reliability of the scale
The result of the check on the reliability by Cronbach's alpha shows that 40 out of 40 observed variable are
consistent (qualified). All the factors are correlated with the total variation that is greater than 0.3 and
Cronbach's alpha coefficient is greater than 0.6. As a result, it can be concluded that after the preliminary
research, the elimination of 5 observed variables that do not meet the requirements ensure the reliability of the
scales used in the model.
4.3.2.2. Check on the value of scale
The result of EFA shows that KMO coefficient is 0.792, Sig. value achieves 0.000. This indicates that EFA is
consistent with the market data and the observed variables are correlated with each other (Table 4.55). Total

Variance Explained is 79.013% (greater than 60%), which points out that the extracted factors can explain
79.013% of data variables. After EFA analysis, there is no disorder of observing variables among components,
initial component names remain.
4.3.2.3. Confirmatory Factor Analysis – CFA
To assess if CFA analysis meets requirement, the following values need to be paid attention:
P value (sig.) ≥ 0,05; CMIN/df ≤ 2 up to 3 ; GFI, TLI, CFI ≥ 0,9 ; RMSEA ≤ 0,08
The result shows that all the index measuring the fit of CFA are satisfactory. Chi-square/df is 1.640; TLI is
0.966; CFI is 0973; RMSEA is 0.045. In conclusion, this model matches the surveyed data and achieves the
unitary feature.
13


4.4. Regression tests
4.4.1. Theses tests
4.4.1.1 Selection of function forms for independent variables
In order to determine the best regression model consistent with market data, the research examines several
forms of functions (Linear, Logarithmic, Exponential,) on the variables X j (j = 1,2 , ..., 9) to consider the
relationship between the independent variables and the dependent variables Y. The results of analysis and test
indicates that the observation data of variables matches linear form.
4.4.1.2 Check on the multicollinearity, autocorrelation and heteroscedasticity
To test the multicollinearity, we usually use VIF index. According to the rules, in case VIF is greater than 5,
multicollinearity occurs. According to the result of analysis, we have the indicators of multicollinearity
including Collinearity and VIF are equal to 1 (small). This fact proves that multicollinearity does not occur in
the model, which is based on the formal research data.
The results collected from SPSS show that the regression residual is approximately equal to standard normal
distribution N (0.1); the average value is 0 and the standard deviation achieves approximately 1, which points
that distribution of Y and the residual occur randomly. Besides, the check of the autocorrelation with the Box Ljung shows the sig. value is greater than 0.05; so there is no correlation between the residuals.
According to the collected data for the formal study, the usage of SPSS makes the value of Y increase but the
remainder is scattered around a value of 0, so it can be concluded that heteroscedasticity does not occur.
4.4.1.3 Correlation of variables in model

As the result of calculate, correlation of variables in model is under ≤ 0.9. That means variables are suitable in
model.
4.4.2. Estimation of regression coefficients:
The result of calculation and multiple regression analysis through using SPSS 20 software, the result table is
followed:
Variables
(components)

Non-standardized
coefficients

regression

Standardized
regression
coefficients

Verification
value (t)

Sig value

.000

1,000

Coefficient

Error

(Constant)

-1.571E-017

.026

X6

.639

.026

.639

24,825

.000

X3

.577

.026

.577

22,411

.000

X8

.122

.026

.122

4,745

.000

X4

.234

.026

.234

9,074

.000

X1

.150

.026

.150

5,807

.000

X2

.136

.026

.136

5,281

.000

X9

.134

.026

.134

5,214

.000

X7

.137

.026

.137

5,302

.000

X5

.103

.026

.103

4,005

.000

According to SPSS result, the value of a0 is quite small so the regression model is written as following:
Y = 0+ 0,15X1 + 0,136X2 + 0,577X3 + 0,234X4 + 0,103X5 + 0,639X6 + 0,137X7 + 0,122X8 + 0,134X9 + e
4.4.3. Inspection of regression coefficients
After calculation and estimation of regression coefficients, statistic inspection value t and probability value
14

(table 4.61), we will inspect the follwing hypothesis (10 hypothesises)
Hypothesis Ho: aj = 0
Opposite hypothesis H1: aj ≠ 0 (j = 0, 1, 2, ..., 9)
Inspection value t shows that coefficient a0 has no statistic significance, a1 to a9 all have statistic significance or
reject Hypothesis Ho and accept Hypothesis H1 that regression coefficient ≠ 0.
Result of research model as below:
Y = 0,15X1 + 0,136X2 + 0,577X3 + 0,234X4 + 0,103X5 + 0,639X6 + 0,137X7 + 0,122X8 + 0,134X9 + e
4.4.4. Inspection of model appropriateness
This is the most important work of any statistic procedure, model construction from data must prove the
appropriateness of model. Inspection F is used to inspect t is hypothesis and equivalent to inspection F in
ANOVA. If variables of regression is much bigger than variables of balance, model is more appropriate. Sig
value (P value) of F is smaller than given α (usually 0.05) to evaluate the appropriateness of model. Adjusted
coefficient R2 is used to evaluate the appropriateness. The bigger the coefficient is, the more appropriate the
model is.
In order to inspect the appropriateness of model, we inspect the following hypothesis:
Hypothesis H0: R2 = 0
Hypothesis H1: R2 ≠ 0
Result of calculation and analysis on SPSS as follows:

Adjusted R2 of 0.894 shows the appropriateness of 89.4% of model compared to the fact or variable X can
explain 89.4% of change significance for variable Y.

4.4.5. Confidence intervals of regression coefficients
Independent variables

Regression
coefficients
following

The confidence interval of the regression coefficient
(95%)
Lower bounds
Upper bound

1

X6

.639
denominator

.589

.690

X3

.577

.526

.628

X8

.122

.071

.173

X4

.234

.183

.285

X1

.150

.099

.200

X2

.136

.085

.187

X9

.134

.083

.185

15


X7

.137

.086

.187

X5

.103

.052

.154

4.5. Some discussions of research results
After taking advice from experts of the factors hindering the use of ABC methodology in Vietnam, we find out
that there are nine factors that hinder the application of this method in practice. These factors are awareness
limitations, lack of resources, psychology of change limitation, no business strategy requiring ABC, lack of
leadership support, limitation of application technique, no concern of training, inappropriate change of
organizational structure when applying ABC, no building objectives for each period together with welldeserved reward. Therefore, the result of qualitative survey reaches the first research target because it shows
nine factors that have an impact on the distinctive characteristics in Vietnam.

Showing the factors is the first step in the list of objectives of the thesis. The next problem is the assessment of
the impact of each of these factors in the context of applying the ABC method for Vietnam’s enterprises. This is
also the second objective of the thesis. To specify the impact, the quantitative survey is conducted aimed at
testing the theoretical regression model mentioned in the first objective. After the process of collecting data
taken on the research sample, we receive the following results.
Component

Regression
coefficients

Contribution
(%)

X1 – Awareness limitation

0,150

6.7

X2 – Lack of resources

0,136

6.1

X3 – Psychology of change limitation

0,577

25.9

X4 – No business strategy requiring ABC

0,234

10.5

Component

Regression
coefficients

Contribution
(%)

X5 – Lack of leadership support

0,103

4.6

X6 – Limitation of application technique

0,639

28.6

X7 – No concern of training

0,137

6.1

X8 – Inappropriate change of organizational structure when
applying ABC

0,122

5.5

X9 – No building objectives for each period together with
well-deserved reward

0,134

6.0

(according to the calculation material resource of author)
Based on the result of the table 4.67, we can see the greatest impact of technical restrictions on the
application of the ABC method to enterprises in Vietnam, making up 28.6% of all the factors. This
result shows that this study is suitable for the countries that start considering applying the ABC
method. The research on the use of ABC method in every enterprises in Vietnam also indicates that
technical problems are also considered a obstacle. Thus, the statistical data that the thesis collected is
suitable for current situation in Vietnam’s enterprises and the areas that begin the research and the
theoretical application of ABC method to accounting information. Compared with previous study on
separate application of ABC method, the thesis specify the technical restrictions that Vietnam is
facing now. These issues are also carefully considered through the test of the scale and the reliability.
The summary of Chapter 4
Chapter 4 presents the results of the consultation of experts in order to determine the factors affecting the

16


application of the ABC method to enterprises in Vietnam. This chapter also gives the results of testing and
adjusting the scales to get a complete survey used for the formal study. The sample collected from the official
testing result shows that the scales achieve the reliability and the values (convergent value and distinct value).
CFA expresses that the given model is consistent with the theory. The coefficients in the multiple regression
model also can explain the impact of each factor on applying the ABC method to enterprises in Vietnam. In
addition, checking multicollinearity, autocorrelation and heteroscedasticity enhance the match between the
model and the reality.

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS
5.1. Main results
From the research results in the Chapter 4, this section summarizes the key results.
According to the research in the world, the ABC method has many advantages. The information taken
from this method redrawn the entire map of the business activities. This map shows that the main activities that
require the largest amount of cost have the ability to help to increase the profit. Meanwhile, it is important to
reduce or eliminate the activities that have no contribution to creating good values. The information from this
method presents that it is necessary to focus on the products, customers and distribution channels that bring the
most profit. The ABC method is very successful in academics. Quite a lot of researches on this method such as
the implementation process and the factors helping this method gain the success. However, in reality, the rate of
the application is very low, which is seen as a paradox. In the context of the crisis from 2010 to 2015, the urgent
requirement is the arrival of a new method of cost administration to help businesses survive and increase the
competitiveness. With such requirements, this thesis defines the objective of seeking the factors obstructing the
application of the ABC method and the impact of each factor. Based on the previous studies and advice from
experts, the thesis lists nine main factors including limited awareness, limited resources, psychological change,
no business strategy that requires the use of the ABC method, no support from leaders, limited applied
techniques, no investment in coaching and training, unsuitable organization structure, no specific targets for
each stage associated with well-deserved reward.
The next major objective of the thesis is measuring the impact of these factors aimed at helping businesses

select a right solution. Applying the knowledge of Pareto chart and the 80/20 rule knowledge to measure the
level of materiality of each factor. The figure 5.1 shows the influence of each factor, the key areas and main
factors. The results shows that the first three factors have the strongest influence, making up 65% of the level of
influence. The technical restriction accounts for 29%, the limited psychological change accounts for 26%, the
failure of building suitable business strategies occupies 10%. The next three factors include limited awareness,
no investment in coaching and training and the shortage of resources makes up 19% of the level of influence.
Other factors including no specific targets for each stage associated with well-deserved reward, unsuitable
organization structure and no support from leaders holds 16%. The statistical data also shows that the collection
of samples and research models of the factors have the high reliability, the studied factors can explain 89.4% of
the level of influence on the use of ABC methods in Vietnam’s enterprises.
Pareto chart of the factors affecting the restrictions applying the ABC method

17


5.2. Recommendations related to the results of research
The role of modern accounting is handling the issue of costs. This task becomes increasingly important
and difficult in the competitive environment with rapid changes in these days (Kaplan and Cooper, 1998;
Douglas, 2013). A complex cost accounting system does not really ensure the high accuracy (Douglas, 2013).
ABC is considered a useful tool for solving these cost matter of the companies (Kaplan and Cooper, 1998;
Kaplan and Anderson, 2004; Williams, 2012; Gary 2012). According to the result of analysis in the Chapter 4
and Figure 5.1, it can be seen that there are 9 factors affecting the use of the ABC methodology in Vietnam and
if finding out the solution having the effect on these essential factors, it is possible that the majority of problems
will be solved.
5.2.1. Technical restrictions
The first factor making a strong impact on the implementation of ABC method is the technical
limitations. The problems include identifying the reasonable number of activities, selecting distribution criteria,
maintaining the ABC system and choosing the supporting software.
Identifying the reasonable number of activities is the basic problem in the implementation of ABC and
considered the premise of conducting next steps in a series of technical steps for the application of the ABC

method. There are many ways to properly identify the activities, which depends on the features of enterprises.
However, the simple way that can apply on almost all of them is looking at the last subject that enterprises
provide the services. The last subject of the enterprises may consist of the products or services, obtained
revenue or customers. The asked questions are “what does the final subject need” and “how can we meet the
requirements of the final subject”. With the support of mind map, the activities will gradually be displayed with
the purpose of meeting the demand of the final subject. The activities can be ranging from the assembly of
products, the transport of goods to customers, the manufacture of parts, the quality test to the last activity. This
is an adverse process which starts from the requirements of the last subject to find out the first activity. Another
solution to identify the main activity of the unit is the construction and the analysis of the production process
based on the manufacturing process that will separate the activities for each subject. When separating the
activities in the unit, technical problems of the implementation of ABC method are almost resolved. However,
too many detailed activities will have negative impacts on applying the method. In terms of the experience of
18


implementing, the number of main activities in the unit should range from 30 to 40. The activities should be
classified based on their function. The classification depends on the major functions of the activities. For
example, for after- sales activity, it is necessary to answer the questions of customers, maintain the relationship
with customers and repair products. Grouping the activities will make the process of collecting and handling the
information collected simpler and help to meet the demand for the information of managers. A problem related
to the activities analysis is that a dictionary for activities should be created after the analysis. This dictionary
describes the activities, the included costs and the method of analysis for the description of activities. This step
is the final one in the analysis of activities that plays an important role but quite a few units often skip it. We
take an example of the research by Nguyen Xuan Hung and Nguyen Viet Hung (2016) which is successful in
applying on the analysis of the basic activities of the enterprises of maritime services to effectively use the cost
allocation method based on the feature of activities. Initially, because of not separating the activities related to
each service, each customer, identifying the result of business for each service faces to a lot of difficulties. The
business result is just revealed when posting all the costs and revenue. Enterprises have no awareness of
effective activities and have the difficulties in negotiating with customers on prices for each service package.
After describing and rewriting process for each service and each activity, which starts from the questions “What

activities does this customer or service need?” These activities will be redrawn and described in the text. From
there, the accounting department in collaboration with executive department will calculate the cost for each
activity and flexibly select the allocation criteria consistent with the nature of production. As a result, the cost of
all the services will be calculated exactly; the information from new method helps board of managers give
suitable decisions and the profits will continuously increase. The sales department uses the information from the
method of cost allocation to negotiate new prices with customers for each service in the attached service
package. Operating department can consider the information to adjust and improve the methods in order to
reduce costs. The accounting department uses the information about the cost allocation method to build the
estimation system with the high accuracy. The second issue of deployment techniques is the selection of
distribution criteria. In theory, it is possible to base on three criteria including the number of times, time and the
intensity. For companies with simple production processes and stable production, it is suggested to choose the
frequency criteria to easily control. The companies with flexible production process can select the time criteria
to easily control. The companies that have unique products and require high technique the intensity criteria to
match the technical characteristics of the products or the customers of the unit. The selection criteria can be
flexible and companies can apply various criteria while implementing ABC. It is not necessary to only one
criterion. Each of them has it own advantages and disadvantages. The choice depends on the manufacturing
process or necessary activities. A note is that for one activity, the company can change allocation criteria in
different periods. In the early stage of implementation, companies can choose frequency criteria. But after
updating the information in the dictionary of activities, the time criteria can be used because it is appropriate in
the current circumstance. Another way to solve this technical problem which receive the concern of many
researchers is the time criteria that is applied for the whole process of cost allocation method estimated
according to on the activities(Time - Driven activity Based Costing, TDABC). This method was suggested by
Kaplan and Anderson (2007). A key feature of this method is that listing the activities according to the time and
use time as the allocation criteria. With this approach, the cost of evaluation, the maintenance of cost allocation
method will be simple and help to reduce the cost, and will detect free time for the use of resources. The way of
conducting this method only has some basic difference of time criterion with the original method. For
Vietnam’s enterprises, it is feasible to apply this one in practice to simplify the application, reduce training
costs. This one is also appropriate for small and medium-sized enterprises (Henrik and Erling, 2011). We will
take the example of the success of Sirirat et al (2010). This person is successful in applying TDABC to the
enterprises of transport in Thailand. The analysis of the main activities only consists of 6 activities (the

preparation for the goods delivery, checking - printing bills, the operation of loading, transport, unloading and
warehouse) and 5 key resources related to the activities (equipment - office, human resources, computer
systems, trucks, warehouses). The companies have specific time for activities and use the mathematical model
to allocate the activities and the costs for routes and customers. The result is that the companies identify the
services, goods, customers that bring profits, and some cause the loss during the operation of the company. As a
result, the company make the appropriate adjustments to the customers that suffer the losses.
The next problem is maintaining the ABC system in the unit. When set out, this method becomes a tool for
providing information. The ABC method needs to inputting data, handling information, printing and reporting.
For the initial units, the first version is often imperfect; handling information is quite slow, the amount of data is
large and the report does not meet the needs. Thus, it is necessary to maintain and upgrade the ABC method in
the unit. Periodically, individuals involved in the project need to review to improve the system for the analysis
of activities, the selection of criteria, the sample of report. The maintenance will gradually help the unit improve
19


the system to provide accurately information and reduce the expenditure.
The selection of supporting software is flexible options and depends on each company. For the companies
having simple processes and small scale, it is possible to use a spreadsheet, or some analysis programs of the
ABC method with small value. The operation of a spreadsheet or simple programs have the advantage of low
cost and the update or the analysis of activities for the unit. In contrast, for the companies with the complex
scale, spreadsheets or small programs may be inappropriate. The selection of software depends a lot on the
project leader. If specific requirements are set out, it is easier for the selection of software.
In summary, technical limitations in the ABC method seems to be a big problem of the countries that start to
seek the way to implement and apply it. This problem can be easily solved when the nature of the ABC method
is discovered. This method is used to allocate the costs and direct toward the final subject that the company
provides services. Understanding the nature will make the analysis of activities, criteria selection and
maintaining the system simpler. The selection of software will depend largely on the method of activity
analysis, the choice of criteria and budget. However, the spreadsheet is still preferred and actively support the
analysis and the update of data.
5.2.2. Limited psychological change

According to the results of regression model analysis, the second factor is limited psychological change.
Particularly, it comes from the concern about the capacity assessment and the sack, the difficulty of
implementing the ABC method, dealing with the initial data and the shortage of resources.
Psychological problem of sack is considered a key factor in the group of psychological factors. To
overcome this problem, the feasible solution is specifying weaknesses and current situations, and building
obvious objectives for the measures for the system of recording costs at the unit. The clear goals will reduce the
concerns and the deep understanding of the current situation will become the motivation to overcome the
difficulties. The objectives will play a role as a landmark supporting the evaluation of the implementation. The
results of working and the small objectives will help participants reduce the pressure on the problems related to
capacity assessment and the sack. The table 5.1 illustrates the current situation and goals in coming future aimed
t helping reducing the psychological pressure.
Psychological problem that it is hard to implement following theory can be solved by classify objects for
ABC theory transmit. People in the unit can be divided into four main groups related to new cost allocation
implementation, including: leaders and impact people, quickly receptive people, slowly receptive people and
conservative people. Each group can use different methods to propagate and remove stress. Stating objectives,
benefits and clear way of implementation for their imagination will decline anxiety and increase interest of
reception. In addition, different groups with different impact frequency and ways will affects much on removing
psychological obstacle of ABC method.
Psychological problem of being worried about data processing with huge amount can be solved by
subdividing data entry works. Data entry subdividing and processing need the combination of departments.
Functional departments with their data can support to enter and process data together with group of
implementation. On that basis, data will be entered more quickly and accuracy because departments understand
related data and do not put pressure on some other groups. This helps to decline pressure of data entry
psychology and encourage individuals to implement together.
For psychology of admitting lack of resources before implementation, it is necessary to clarify objectives
and methods suitable for the unit. Psychology of admitting lack of resources starts from people who does not
really understand objectives and steps of implementation. If the project has objectives and way of
implementation in detail, these people may rethink how to achieve objectives with the fewest resources. When
understanding the way and objectives, this psychology will be removed and encourage creativity to have the
best way of implementation.

In conclusion, psychological problem will prevent much in process of implementation. In order to
overcome this problem, objectives need to be particularized to recognize milestones for comparison. Specific
description of instruction also helps to decline psychology of being afraid. Creativity solutions should be
encouraged to attract participation to decrease psychological pressure when implementing.
5.2.3. Problem of choosing ABC related strategy
According to conception of modern business, current business environment has no limitation but a flat
world with many variations from scientific-technological development. In order to exist, companies need to
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develop their competitiveness advantage, build strategy of new product and market development.
To develop competitiveness advantage, companies need to review intrinsic factors which contribute to the
success of companies. It is not easy to see these factors. Administrative tools to identify competitiveness
advantage and choose strategic direction are not concerned by managers. One of intrinsic factor identifying
tools, SWOT, is not promoted effectively. If this tool is combined with game theory and presented with choices
to promote maximal internal factors, information demand for decision will boost companies to use ABC to
control resources better for maintenance of competitiveness advantage. Therefore, it is necessary to have a new
view of administrative tools and their combination to create characteristics in order to build competitiveness
advantage that companies need for their existence and development.
For problem of new product and market currently, many companies find difficulty in identifying new
product and orienting market. They can study and apply administrative tools such as Boston matrix, Ansoff
matrix and Sandcone analysis. Ansoff matrix helps companies analyses manufacturing products. This matrix
helps companies predetermine whether the products need enter market, develop or the market need diversify or
expand. Then leaders make appropriate decision for each product investment. Boston matrix helps companies
review markets which they are following. If products are in star location, market share is growing and need to
be invested and developed. If products are in question mark, market share is narrow though it is expanding.
Products with large market share but no growing, products are in dairy cow location. If market share are
recessed, products are in dog location. Sancone analysis helps managers make decision of focusing on product –
service quality, customer’s belief, order processing speed or cost decreasing.
In conclusion, to choose appropriate business strategy, companies must consider intrinsic factors which

strengthened them. In addition to administrative tools which need renewing and combining with other tools to
make difference, ABC method will help managers control existing cost and resources well.
5.2.4.

Other related recommendations to support for ABC application in enterprises

Training and couching factor in research result does not affect as much as three above factors, however
appropriate solution to this factor also helps to decrease impact of the above factors. If training and couching
issue is solved well, limitation of implementation technique, awareness limitation or psychological stress will
reduce. Training issue can be carried out in various directions. For example, ABC method is introduced in
universities as a new cost valuation, professional associations of accounting, auditing update new knowledge for
members. Such associations are where to exchange implementation experience, gradual generalization of
knowledge and implementation way for members. For enterprises, in order to quickly carry out ABC method
without technical limitation, they may actively develop training plan with a special subject of this method. The
special subject need discussing in advance with consultants about present situation of the enterprise to give a
suitable training program. Training courses should focus on important objects such as accounting department,
managers to create background for ABC development.
Related to training and couching issue, when tested model gives initial result, next concern will be
experience transfer to the entire company. In order to do this, implementation steps should be recognized,
calculation and procedure forms should also be standardized. It is necessary to build operational dictionary to
identify main activities and procedures in the company. Procedure standardization may need consultancy of
experts of experienced staff. Therefore, for ABC existence and development in the company, the concerned
issue is popular training of ABC for the whole staff in the spirit of cost recognition of arisen objects.
Awareness limitation of ABC can change by changing view of accounting information system.
Currently, awareness of accounting biases to financial accounting. Managers still think that accounting has only
target of serving tax statement and auditing. They have not really understood that accounting is an arithmetical
language which can help to provide information of company activities usefully. Underlying cause is that
regulatory accounting system which has been much complication and accounting principles have many unclear
points. Besides, managers rely on experience rather than statistics and data to make decision, which leads to
disadvantages of current accounting system. In order to remove restrictions on current accounting, promoting

conditions are needed to change view of accounting and to be premise of ABC. Circular 200/2014/TT-BTC on
22 December 2014 is a very important premise which remove psychology of regulatory-directed accounting.
The spirit of this circular allows companies to recognize accounting information by themselves on the basis of
unobligated general instruction, with the most suitable recognition way for their activities. Therefore,
companies can reorganize their accounting information system so that it is the most appropriate for the
leadership and conformed to instructed standards. The system are not compulsory to comply regulatory of tax as
long as it reflects exactly economic content of the company. Thus, external condition (Circular 200/2014/TT21


BTC) and intrinsic condition (accounting information in the company) are ready, companies need to gradually
apply ABC information to make decision. To do that, accounting department has to persuade the managers with
real benefits of ABC. Information from tested model is compared with traditional method to be the basis of
decision. Based in initial results, this method will gradually actualize and expand application.
In order to increase persuasiveness of ABC benefits to enlist the support of leadership, accountants
should themselves build a cost and profit analysis system for each activity, each customer, and each market
based on ABC. When managers see useful information to make decision, they will change awareness of this
method and require ABC information as an essential part of management information. According to Brent
(2012) and Douglas (2013), ABC application in enterprises are totally possible, and they developed the easiest
procedure of implementation for enterprises. They supposes it just need to understand ABC philosophy that cost
of product or customer should be allocated for them the most appropriate.
According to Douglas (2013, to overcome problem of budget lack, implementing this new method does
not need much cost. The most important thing is way of approach. Enterprises can use Excel spreadsheets,
develop the procedure of ABC simply but accurately in order to minimize the cost of analysis, data collection,
training and consultancy. This will reduce the anxiety of managers about restriction of implementing budget.
Depending on management style, available condition or staff’s qualification in the accounting department,
implementation plans will be different. Moreover, the implementation may not be perfect initially, but can
improve continuously when support conditions change. Importantly, information is built towards reasonable
cost allocation for resource users.
In conclusion, if training and coaching is focused to be solved from various directions such as companies,
associations, universities, etc., knowledge of ABC will be popularized and contribute to decline other factors’

impact. In addition, accountants also have to persuade the managers about benefits of this new method based on
various information for making decision with benefits. This will contribute to actualize ABC in enterprises the
most specifically.
5.3 Limitations and recommendations for next researches
Researches on activity-based costing are currently expanded in many countries. Theoretical researches all
prove this method can help enterprises with competitiveness advantage, better control of cost and management
ability increase. Although this research is inspected to be relatively appropriate and shows several factors
restricting ABC application in enterprises, it is just a piece of ABC research in Vietnam and there should be
more related researches. According to Turney (2010), research of ABC is not only applied but also used with
information for entire management and strategy planning for companies. And the recent trend shows that after
applying ABC method, research which directs to combine this method with other models such as TOC, EVA,
BSC, TQM, JIT is also direction of recent application research. In addition, using ABC to evaluate operational
result through ROI criteria (Return on Investment – ROI), which is used to consider efficiency of ABC
application, is needed to study in Vietnam.
Another trend of ABC application research is transfer to improvement research with TDABC version
(Time Driven Activity Based Costing – TDABC), which uses time criteria as allocation basis, to make model
smaller in some cases. This problem needs to be researched for Vietnamese companies.
Another direction of ABC-related application research is combination of estimating model for enterprises
(Activity – Based Budget – ABB). This model analyzes activities and costs to be the basis of exact information
providing when the estimation is established. This decreases error significantly to increase the reliability of
estimation when relaying on necessary activities to achieve objectives
In addition, this research is carried out with a small number of samples represented for companies, it is
possible for next researches to expand sample and carry out again in order to respect variables which are
established on recommended research model. This can bring more general result and help to discover other
factors which are not established.
Samples can be other objects such as the whole company in any scale, or state companies, foreign direct
investment company or a business field of apparel, logistics, etc. in order to find out impact variables in special
fields. Diversified samples helps to inspect and add more factors to complete the model. This will increase
research experience and simpler implementation of ABC.
Another direction is practical application in some companies to assess whether theoretical model like this

research recommendation really need to add new factors that the thesis has not mentioned. Research of real
situation in each company will help actualize theory and make theory of this method exist and develop.
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Thesis-related publications
[1]

Activity-based costing application in seaport service, case study in Tan Cang – Cai Mep

International Company Limited, 2016. Accounting & Auditing Review, No 3, page 7 – 29.
[2]

Study on assessment model of ABC application limitation in Vietnam’s enterprises, 2016.

Vietnamese Accounting and Auditing Yearbook – 20 years in Reformation and Integration, page 317 –
322.
[3]

Factors of preventing activity-based costing application in small and medium enterprises of

Vietnam, 2016. Journal of Science of University of Finance and Accounting, No 6, page 68 – 74.