Factors affecting the application of ABC costing method in manufacturing firms in Vietnam

Article history: Received: February 16, 2020 Received in revised format: March 22 2020 Accepted: March 22, 2020 Available online: March 25, 2020 In the current market economy with fierce competition, the number of newly established businesses is increasing, but the number of businesses that are unprofitable or have low profit also accounts for a large proportion. Accordingly, one of the main reasons for low operational efficiency is an outdated management method and low-cost efficiency. Previous studies on cost management focused primarily on traditional cost methods. Different from previous studies, this study explores the relationship between the application of the cost-based method (ABC costing-method) and the improvement of business performance in manufacturing firms in Ho Chi Minh City. The authors conducted quantitative research by analyzing the Structural equation modeling (SEM) with AMOS SPSS with secondary data collected from the survey of managers of 620 firms. The research results show that if businesses make good use of the ABC costing-method, their business performance will be significantly improved. © 2020 by the authors; licensee Growing Science, Canada


Introduction
According to Kaplan and Cooper (1998), norms and standards of progressive costs vary with the development of technology, management methods, and new business methods, whereby businesses need to timely grasp new trends to cost-effective management, thereby contributing significantly to the business performance of the unit. As such, one of the essential issues posed to managers of businesses is cost control. In particular, ABC costing-method is the preeminent method to help businesses increase operational efficiency and competitiveness. Based on the information that this method provides, administrators know which activities create added value, which activities can be eliminated with the purpose to save costs for the firm. Besides, this method also helps managers to determine the cost of products more accurately, thereby pricing products more accurately. At the same time, ABC costing-method (Chouhan et al., 2017;Amiri & Khmidi, 2019;Le & Nguyen, 2019) provides information for the firm to focus on which groups of customers and which markets are most profitable for the firm to increase competitiveness. This is important for firms to rely on information about the estimated costs allocated to corporate resource users. This method also provides a clear picture of the resources used for business activities that help the firm manage costs effectively. The application of the ABC method has been evaluated quite scientifically by the researchers, but there are very few articles sharing about the experience of applying this model in practice (Jamaliah & Maliah, 2008;Henrik & Erling, 2011;Ibatova et al., 2018). According to Huynh and Gong (2014) and Huynh et al. (2013Huynh et al. ( , 2014, the application of this method to firms in Vietnam is very limited. According to our research, comprehensive research on factors affecting the application of the ABC method to improve business performance for manufacturing firms in Ho Chi Minh City is currently lacking. This is the research gap of this method in Vietnam in general and in Ho Chi Minh City in particular. Finding the factors that affect the application of the ABC method to manufacturing firms in Ho Chi Minh City is important, helping managers to identify suitable conditions to be able to successfully apply this method to each specific enterprise helps improve business efficiency at the unit. Swenson (1995) studied the benefits of ABC costing-method in manufacturing enterprises. The research results have confirmed that all businesses have positive business results when applying this method. Accordingly, managers believe that production costs are improved and cost control is more effective. The ABC method helps managers see the cost of each customer and the profit each customer brings. Besides, the study also showed that 20% of enterprises in the sample survey using ABC method use information to make optimal decisions about resources; 70% of businesses want to use information from this method to make decisions about prices and product packages. On the other hand, the study also shows the support of management and the need to use the information provided from the ABC method to meet the cost management system in enterprises. The study of Gosselin (1997) examines the organizational structure and the status of business strategy on the acceptance and implementation of operational management. The sample was conducted on several subsidiaries in several manufacturing groups in Canada. Activity Management (AM) research is divided into three levels: activity analysis (AA) research, activity cost analysis (ACA), and ABC costing-method. Activity analysis (AA) is a prerequisite for performing cost analysis for each activity under the ACA method. Research shows that the strategy influences the acceptance of operational management (AM). The organizational structure clearly distinguishes functions and centralized powers from which it is easy to accept governance. Enterprises with a competitive strategy easily accept the application of the cost method. Innes et al. (2000) studied the survey and analyzed the acceptance of the ABC method and built a standard model for this method on 1,000 units. The study found that significant adoption rates of the ABC method focus on large-scale businesses and financial enterprises. The research results show that there is a tendency to apply the ABC method more to economic units, but they have little experience in applying this technique in practice. Also, Innes et al (2000) also argue that the implementation depends heavily on methods, techniques and the costs incurred when implementing also limit this application. Cotton et al. (2003) studied ABC costingmethod in New Zealand and England. The results of the study suggest that the difference in acceptance of the ABC method in New Zealand and the UK is due to the support of the leader. The active participation of accountants is also an important factor contributing to the successful implementation of the ABC method. The study also showed that there is no relationship between industry sectors and the adoption of this method. Small businesses have also studied the ability to apply ABC and deployment resources. Businesses that successfully apply this method also reduce operating costs, develop a more reasonable product pricing method, evaluate results and make management improvements, thereby improving efficiency and operational results for the unit. Research by Huynh et al (2013) shows that the proportion of enterprises applying the ABC method in the world is very limited. On the other hand, Huynh et al (2013 a) suggest that this approach applies to small and medium enterprises. Further, this study also shows that it is possible to combine the ABC method with cost norms to be a strategic decision support tool.

Literature review
Research by Dubihlela and Rundora (2014) on employee training, management commitment to implementing the ABC method in small and medium enterprises shows that the application of the ABC method has a positive impact on performance results. Based on 149 sample surveys in South Africa, the model conducted by quantitative research shows that the employee training factor and the management commitment and support factor have a positive effect on the acceptance of the ABC method adoption. Ramezani (2015) studied the problems of implementing ABC costing-method in Iran. The study examines the obstacles when implementing the ABC method in Europe and the US where there are similar conditions in Iran. The results showed that 7 factors had similar results. The study only stops at the level of identification of similarly interfering factors, not measuring the impact level of each factor.
In summary, the studies confirmed that the number of businesses that accept ABC is quite large in many countries. To apply the ABC method, business managers consider the impact factors such as management's awareness and support, market competitiveness, technical implementation methods, and qualifications. accounting staff, training, and training. On the other hand, the research also confirms that the successful application of the ABC method also contributes to improving the business performance of the units. This is an important basis for the author to build a research model for the article on factors affecting the application of the ABC method in manufacturing enterprises in Ho Chi Minh City.

ABC costing-method
Activity costing (ABC) is an activity-based costing system. According to Krumwiede and Roth (1997), the ABC method is a centralized accounting management system that measures costs, activities, products, customers and cost objects. This method allocates costs to cost objects based on the amount of activity used by that cost object. According to Horngren (2003), the ABC method is an improvement of the traditional pricing method that focuses on the specific activities of the basic cost objects. This method aggregates the cost for each activity and allocates the cost for each product or service based on the activity consumed by that product or service. According to Maher (2006), the ABC method is an operational-based management tool. First, the cost is allocated to activities, then it is allocated to each product or service based on the activities that this product or service has consumed. ABC provides information on the activities and resources needed to carry them out. Therefore, ABC is not only a process of allocating costs but also changing managerial thinking from cost-cutting to improving business value. It can be seen that many scholars around the world have come up with different concepts about the ABC method. In general, these authors acknowledge that the ABC method overcomes the disadvantages of the systematic costing method. The ABC methods considered to be a strategic cost management tool, helping businesses determine which activities create value and which do not create value, thereby continuously improving the business process. to lower production costs and improve the centuries of businesses In a nutshell, the ABC method is a system of measuring costs, aggregating and allocating the cost of resources into activities based on the use of resources, and then the costs of activities. are allocated to pricing objects based on their usage.

Pros and cons of the ABC costing method
According to the ABC method, general production costs are aggregated by activities, that is, costs are aggregated according to the source of costs. Applying the ABC method, management accounting has the flexibility in using the cost allocation criteria for the product. This pricing method takes care of all the general costs, including the costs of the above functional parts, and so this allocation goes beyond the traditional boundaries for a long time only calculating costs incurred at the workshop. The application of the ABC method also contributes to supporting marketing activities in determining product structure as well as price policy. The biggest drawback of the ABC method is costly and time-consuming. When applying the ABC method, there are still many cases where it is not possible to allocate general production costs accurately. The ABC method requires the cooperation of many departments in the business, the support of business leaders and employees in the business, especially the accounting department.

Data and methodology
The sample in the official study was conducted by a non-probability sampling method, collecting data from 620 enterprises out of more than 2,000 manufacturing enterprises (corresponding to 13.34%) on the city table. HCM. Subjects of the survey are representatives of the board of directors of the businesses in charge of the accounting and financial work of the unit. The author desires to gather more businesses for the survey but cannot because the conditions of the survey do not allow. The time for conducting the survey and data collection is from July 2019 to October 2019 in the main production sectors of Ho Chi Minh City. The main data analysis method used for this study is the Structural equation modeling (SEM) model analysis method with AMOS -SPSS. Therefore, to obtain a reliable estimate for this method, according to Tauchen (1986), the sample often has to be larger than n> 200. Based on the rule of experience of Hair et al. (2010), with 15-44. For an estimated variable, the minimum sample size needed for this study is 396 = 44×9, or n> 50 + 8× number of variables = 50 + 8×9 = 122. Combining these principles, the sample size at a minimum chosen by the author for the official research is n ≥ 396. Thus, with 620 surveyed firms to collect data for analysis, it has exceeded the sample of at least 224 samples.

Research models and hypotheses
The theory of contingency has been developed and used by management accounting researchers between the 1970s and 1980s. The theory of contingency has studied management accounting in general and the ABC method in particular. an organization in its interaction with the operating environment of that organization. In other words, an accounting system is appropriate for an organization depending on the specific characteristics and operating environment. This means that building an effective ABC costing method must be appropriate for each organization, with the internal and external environment in which it operates. Based on the contingency theory, it shows how the types of factors of business characteristics and environment influence the use of information provided by the ABC cost method. The study of Gordon & Miller (1976) is applied to the thesis, according to which the theory of contingency will be applied in explaining the influence of the Environmental factor -The degree of competition; cost control strategies and organizational identity factors -The level of information technology to the behaviour of applying the ABC method of business managers. According to Hanley and Spash (1993), the theory of costbenefit analysis started in 1808 by Albert Gallatin mentioned in an irrigation project when comparing benefits and costs. By 1936, this theory was formally mentioned in an American flood control law when undertaking an irrigation-related project that had to consider the benefits and costs. Later, this theory was expanded by Eckstein (1958) for the economics of social welfare. The benefit relationship theory indicates that the benefits resulting from the provision of accounting information must be considered with the costs of creating and providing such information. In general, the benefits from accounting information can be used for users: they are related parties, investors and even firms; while the cost is borne by the person who makes the accounting information report but broadly, this cost is borne by society. Therefore, this relationship must always be considered and balanced to ensure that the costs generated do not exceed the benefits. The purpose of management accounting is to serve the needs of corporate governance, so different organizations have different management accounting information system requirements, applying different management accounting techniques. This theory contributes to the explanation of the Awareness factor of administrators; Methods and techniques for implementation; Qualifications of accountants; training as well as information technology level of an organization when applying the ABC method in particular for businesses.
The information systems theory began to be interesting in the mid-1960s with the main role in discussing data selection skills and data processing technology solutions. According to Vodácek (1998), the theory of information systems studies the objectives and objects associated with the information used, requiring the governance process to be standardized to achieve planning and testing functions. control, and always find ways to provide effective decision-making information in tasks. Based on the content of this theory, the author applies this theory as a basis to determine the cognitive factors of administrators; The unit's information technology level in the research model on factors affecting the author's application of ABC cost method.
Inheriting the previous studies and the application of the theories above, the author formulated the research model and the research hypotheses as follows:

Fig. 1. Research model
To consider the influence and importance of factors affecting the application of the ABC method to improve the business performance of manufacturing firms, the assumptions are formulated as follows: Hypothesis H1: The administrator perception has a positive (+) effect on the application of the ABC method to improve the business performance of manufacturing firms in Ho Chi Minh City. Chi Minh.

Hypothesis H2:
The competition level has a positive (+) effect on the application of the ABC method to improve the business performance of manufacturing firms in Ho Chi Minh City.
Hypothesis H3: The cost control strategy element has a positive (+) effect on the application of the ABC method to improve the business performance of manufacturing firms in Ho Chi Minh City. Chi Minh.
Hypothesis H4: Implementation methodology has a positive (+) impact on the application of the ABC method to improve the business performance of manufacturing firms in the city. Ho Chi Minh.

H8
Hypothesis H6: Training has a positive (+) effect on the application of the ABC method to improve the business performance of manufacturing firms in Ho Chi Minh City.
Hypothesis H7: The information technology level has a positive (+) effect on the application of the ABC method to improve the business performance of manufacturing firms in Ho Chi Minh City. Chi Minh.
Hypothesis H8: The application of the ABC method has a positive (+) effect on improving the efficiency of the business operations of manufacturing firms in Ho Chi Minh City.

Model specification
We develop a multivariate regression equation to test the research hypotheses as follows: On a theoretical basis, the proposed regression equation reflects the correlation between factors affecting the application of the ABC method in manufacturing firms in Ho Chi Minh City. Follow the regression equation: β0, β1, β2, β3, β4, β5, β 6, β7: model regression coefficients : error Dependent dock. Example: The application of the ABC method.

Independent variables:
NT: Administrator perception; CT: Competition level; CP: Cost control strategy; PK: Implementation methodology; TD: Levels of accountants; HL: Training; CN: Information technology levels.

Measurement scales
The results of reliability test by Cronbach's Alpha coefficient show that: 44/44 observed variables of 9 factors in the research model are all standard, all factors are correlated with the total variables greater than 0.3; Cronbach's alpha coefficient is greater than 0.7 so it can be concluded that the reliability of the scales used in the model ensures the permitted reliability. The following table summarizes the analysis results to check the reliability of the scales used in the study.  .000 At Eigenvalue = 1.085> 1 extracted from 9 factors from 44 observed variables with a total variance extracted is 56.632% (> 50%) and no new factors have been formed compared to the proposed research model. Thus, after EFA analysis, these 44 observed variables ensure the EFA analysis standard (satisfactory). No variables were excluded at this stage Using the EFA method, we analyze each variable separately to test the multidirectional of the factor and evaluate the scale for the factors. The application of the ABC method in manufacturing firms in HCM 0.808 2.125 53.127 Accept 9 Business performance of manufacturing firms in HCMC (HQ) 0.893 3.346 55.770 Accept As a result, all factors being analyzed have factor loading> 0.55; Eigenvalue> 1, all Sigs = 0.00 <0.05, showing that factor analysis is appropriate. Besides, all of the extracted variances of factors are> 50%. Thus, the conduct of factor analysis explores the factors affecting the application of the ABC method to improve the efficiency of business operations in manufacturing enterprises in Ho Chi Minh City. The scales after preliminary analysis remain the same and are used in official research through CFA affirmation factor analysis and testing of the research hypothesis by the Structural equation modeling (SEM) model in the research section. In the summary table of CFA results (Table 6) with standardized regression weights, all standardized weights are> 0.5 so the observed variables of the scale have convergent values and P-value values are statistically significant. The results show that the model is suitable for the data with Chi -squared = 1255.238; Degrees of freedom = 659; CMIN / df = 1,905 <2; P value = 0.000. Other measurement criteria also reached the required value: CFI = 0.951> 0.9; GFI = 0.908> 0.9; TLI = 0.945> 0.9; RMSEA = 0.038 <0.05. All the weights of the variables are> 0.5, P values = 0.000 should be statistically significant.   Table 7 shows that all the hypothesized relationships in the research model are proved by testing the SEM model. The results of estimating the weights are all positive (+) and statistically significant. That proves the concepts in the theoretical model: Administrator perception (NT); Competition level (CT); Cost control strategy (CP); Implementation methodology (PK); Levels of accountants (TD); Training (HL); Information technology levels (CN). The concept has a positive impact on the application of the ABC method to improve the efficiency of business operations in manufacturing enterprises in Ho Chi Minh City.

Testing and estimating theoretical models with Bootstrap
The Bootstrap test is used to re-estimate the parameters in the theoretical model that are estimated by the optimal estimation method (Maximum Likelihood). In this study, we performed Bootstrap by repeated sampling with a sample size of N = 1000. The value of CR is less than 2 so we can confirm the bias is very small and not statistically significant in reliability. 95%. This proves that the estimates in the model are reliable. After the overall structure model is analyzed and tested, the next step is to look at the estimated values to examine causal relationships. Through the above data table, we see that all factors have a positive impact on the application of the ABC method in manufacturing firms in Ho Chi Minh City. The administrator perception is the strongest factor (standardized weight is 0.197). The second most powerful factor is the cost control strategy (standardized weight is 0.195). The third most powerful factor is the competition level (standardized weight is 0.161). The fourth is the information technology level factor with a standardized weight of 0.120, the fifth is the Method and implementation factor (standardized weight is 0.111) and then the training factor (the standardized weight is 0.108). Finally, the levels of accountants (standardized weight is 0107) have the lowest impact. There is a strong correlation between the application of the ABC method and the improvement of business performance in manufacturing firms in Ho Chi Minh City. Estimated results show that this hypothesis is accepted and achieved a standardized beta value of 0.571 with significance level P = 0.000 <0.05. This result confirms the positive relationship and the impact between factors Applying the ABC cost method to improve business performance in manufacturing enterprises in Ho Chi Minh City. We have P-value = Sig. = 0.000 <0.05 and the value of standardized beta equals 0.571. If the application of the ABC cost method changes by 1 point (level), it will increase the efficiency of business operations in a manufacturing firm in Ho Chi Minh City (or decrease) 0.571 points without considering the other factors.

Conclusion and managerial implications
The research results indicate that all hypotheses confirm the effects of the application of the ABC method improve the business performance in manufacturing firms in Ho Chi Minh City. Accordingly, the administrator perception, competition level, the cost control strategy, Implementation methodology, levels of accountants, training, and information technology level have positive impacts on the application of the ABC method. At the same time, the application of the ABC method has a positive impact on improving business performance in manufacturing firms in Ho Chi Minh City. In particular, the three factors that have the strongest impact on the application of the ABC method to the improvement of business performance in manufacturing firms in Ho Chi Minh City are the competition level, administrator perception and the cost control strategy. The research results show that the application of the ABC method is advantageous. To improve business performance in enterprises, business administrators need to pay attention to the following issues: Managers should be aware of the need for the application of the ABC cost method in determining the cost and cost of the unit's product. The manager has to have a clear direction to build the ABC costing-method system for the unit. At the same time, he or she should provide reasonable spending to deploy this application. To illustrate, firms need to perform well the training for staff, improve the levels of an accountant to be able to implement the technical methods in the conditions of using information technology. Therefore, the application of the ABC cost method is performed methodically and effectively at the unit. On the other hand, managers need to consider cost control as an important work and have a clear and specific control strategy for firms. Cost-effective management is one of the decisive factors in improving the operational efficiency of the unit. Moreover, firms need to implement good inventory policies, pricing policies, policies to diversify and improve product quality to improve their competitiveness in a fiercely competitive environment. Proposed actions will help businesses to apply the ABC method smoothly and contribute to improving the performance of the business. This research studies the impact of several internal factors that have not been studied that of external factors affecting the application of the ABC cost method. On the other hand, the scope of the research is limited to manufacturing firms in Ho Chi Minh City because the sample size is not representative of firms in every industry.