Impact of Activity Based Costing System on Financial Performance of SMEs: A Case of Lester Trading Private Limited

Abstract

Purpose: The purpose of the study was to assess the impact of activity based costing system on financial performance of SMEs. It was observed that high escalating operating costs is a serious cause of concern in most SMEs in Zimbabwe. In order to establish the impact of activity based costing system on financial performance of SMEs, the study would like at the benefits of using activity based costing system, the effects of activity based costing system on cost control, the problems faced with use of activity based costing system and the cost drivers of activity based costing system. Methodology: A descriptive design research methodology was adopted to gather data through use of questionnaires from a population of 15 employees. Data analysis was undertaken by use of SPSS to determine correlations and tables, pie charts and graphs facilitated data presentation. Findings: From the findings, activity based costing system had negative effects on the cost control reduction concluding that there was an insignificant relationship. Originality value: training of employees is important to equip them with the necessary knowledge and skills and applying an effective ABC system.