Statistical analysis of suitability of the activity based costing method in agricultural enterprises
Creators: name: Hudáková Stašová, Lenka
name: Hudáková Stašová, Lenka
Publisher: name: Unknown
Year: 2020
Subjects: subject: Agribusiness
subject: Research Methods/ Statistical Methods
subject: Activity Based Costing
subject: mark-up calculation method
subject: resulting calculation
subject: agriculture
subject: overhead cost
subject: statistical testing

description: Purpose. The paper focuses on comparing two cost calculation method describing the principle, utilisation, advantages and disadvantages of the traditional mark-up on cost pricing (overhead method) against Activity Based Costing (ABC), a new, unconventional method of cost calculation. The aim is to prove that the ABC method allocates costs differently to individual products, in a different proportion thereto, unlike the mark-up method. The ABC method is considered by us more accurate because it views differently how costs originate. Methodology / approach. Statistical data testing was carried out, using the Kolmogorov-Smirnov and Shapiro-Wilk W tests, followed by a paired t-test, and completed with the Wilcoxon signed-ranks test. The data was evaluated for eight selected products, whose overhead value was calculated from both marking-up and ABC, out of a selected set of primary agricultural enterprises in Slovakia. Finally, the results were assessed with an unproven statistically significant difference between the calculation methods found. Results. This paper emphasises a different view of costing with the ABC method which, unlike conventional methods, offers multidimensionality and variation of cost tracking based on real and relevant data. A statistically significant difference between the methods was demonstrated for three pairs of variables (out of a total eight pairs). Statistically significant differences were found for cattle, wheat and sugar beets. Although statistical testing has not shown any significant difference between the methods, ABC is still considered a more accurate costing method for allocating overhead. The argument here follows from the very principle and method of ABC allocation of overheads. Unlike traditional methods, ABC offers multidimensional and diverse cost tracking based on real and relevant data. The direct allocation of costs (using an equal budget base) to products and services does not necessarily capture actual cost flows. Because overheads are higher on farms, misleading data can be provided. Practical experience in agriculture seems to imply that the ABC method is the most cost-effective tool for cost control and encourages its further use in budgeting, planning, modelling and decision-making. Originality / scientific novelty. The paper focuses on cost calculations made in agricultural holdings, often a neglected topic in agricultural management. In particular, high overhead costs in agriculture deserve more attention. Their exact allocation to products is important. The paper also focuses on assessing the suitability of calculation methods in agricultural holdings and on pointing out the need for accurate cost allocation. Practical value / implications. The main results and ideas here can be beneficial for managing agricultural holdings. Where the proportion of overheads is higher, management may be provided with misleading data. Practical experience shows the ABC method to be currently the most cost-effective tool for controlling costs and provides opportunities for its use in budgeting, planning, modelling and decision-making on product range structure, alongside other options.