Activity based costing in small and medium enterprises

The role of Small and Medium Enterprises (SMEs) in a national economy has b een emphasized all over the world considering their contribution to the tot al manufacturing output and employment opportunities. Also, SMEs are flexib le and innovative taking into account the size and business structure. Henc e, there is a potential to improve the overall performance of SMEs and henc e their competitiveness. Activity Based Costing (ABC) is gaining its import ance in organisations which are aiming for a major share in business by imp roving productivity and quality. However, ABC has received little attention from SMEs inspite of the fact that it has an important role to play in imp roving the competitiveness of SMEs. Firstly, this paper reviews the cost ma nagement practices in SMEs. Secondly, a framework has been developed in thi s paper for the implementation of ABC in SMEs. Finally, some future researc h directions are indicated in the area of ABC in SMEs. (C) 1999 Elsevier Sc ience Ltd. All rights reserved.