The Level of Adoption of Some Recent Cost Management Tools and the Perceived Effect on the Performance of Jordanian Manufacturing Companies

Transcription

1 Global Review of Accounting and Finance Vol. 5. No. 1. March Pp The Level of Adoption of Some Recent Cost Management Tools and the Perceived Effect on the Performance of Jordanian Manufacturing Companies Mansour Ibrahim Saaydah 1 and Waheed Rathan Khatatneh 2 The objectives of this study are to: explore the stage and/or level of adoption of some recent cost management tools among Jordanian manufacturing companies in the year 2010; to identify the major difficulties or obstacles facing the adoption attempts of such tools; and to examine the perceived effect of adoption level on company s operating efficiency, relations with customers, relations with employees, accounting performance and market performance. Because Jordanian manufacturing companies do not reveal, in their annual reports, adequate information about their awareness and level of adoption of such tools, the authors had to design a questionnaire to collect the relevant data from key financial personnel in those corporations. The findings of the study, based on forty two responses from thirty companies, confirm the presence of a reasonable level of awareness and adoption, fully or partially, of each of the following four tools in order of intensity: JIT manufacturing; Balanced Scorecard, JIT inventory; Activity-Based Costing; and to a less extent Target Costing and Kaizen Costing tools. The findings also indicate that when considering adoption, the tool that faces the greatest difficulty is Target Costing followed by Activity-Based Costing. As to the nature of difficulties facing firm s adoption of those tools, it was found that the high cost of implementation is the most prevailing difficulty followed by the lack of specialists in application and lack of employees' participation. Furthermore, the respondents believe there will be a positive effect of applying the tools on corporate operating efficiency, relations with customers and employees and on accounting and market performance. In conclusion it seems possible to apply most of the tools in the overall interest of the company if top management commit itself to eliminating or alleviating the difficulties facing adoption. Field of Study: Cost management Key terms: Jordanian Manufacturing Companies, JIT Inventory, JIT Manufacturing, Activity Based Costing, Target Costing, Kaizen Costing, and Balanced Scorecards. 1. Introduction Over the last two decades or so, several new cost and management accounting concepts, tools or policies have been developed internationally. The main objective of such concepts, tools or policies is to help business managers employ the resources entrusted to them more efficiently, effectively and profitably. Among the most important new tools are the following: Just in Time (JIT) inventory, JIT manufacturing, 1 Dr. Mansour Saaydah, Department of Accounting, World Islamic Sciences and Education University, (Amman, Jordan), mssydah@wise.edu.jo 2 Dr. Waheed Rathan Khatatneh, Department of Accounting, Tabuk, University, Tabuk, KSA, wahiddrk@yahoo.com

2 Activity-Based Costing, Target Costing, Kaizen Costing and the Balanced Scorecard. This study is motivated basically by the scarcity of local and regional studies that address the basic issues of how much these tools are known, understood and applied in a beneficial way in the Jordanian manufacturing sector and what are the major obstacles, if any, that stand in the face of implementing these tools soon and successfully. The rest of the paper is organized as follows. The problem statement, importance of the study and the study population and sample are discussed next, followed by the data sources section. The theoretical background is introduced after that, followed by the literature review section. The study methodology is given next followed by the data analysis and results section. Next comes the hypotheses testing and findings section and the paper concludes with a summary. 1.1 Problem Statement Although, the modern cost management tools mentioned above have been applied successfully in one country or the other, and although some of them are as old as 20 years, still some corporate managers vary in their degree of enthusiasm to adopt and use them, especially in Jordan. In fact, we do not read or hear much about certain Jordanian manufacturing companies recognizing, appreciating or reporting the effects such tools have on their operations, financial results or positions. The objectives of this study are to: 1- explore the stage or level of adoption and actual use of some recent cost management tools by Jordanian manufacturing companies; 2- identify the major difficulties facing company s adoption of such tools; and 3- study the perceived effect of the actual application of these tools on firm s operating efficiency, relationships with employees, relationships with customers and accounting and market performance. 1.2 Importance of the Study This study gains significance from its focus on the stage of application and the impact of such application of some important aspects of today s business management approaches and strategies. The studied cost management accounting tools cover various fields of business activity and firm s relations in its value chain and system that should influence its overall performance. They include the use of both tangible and intangible assets of the firm. Therefore, this study considers all important elements (financial and otherwise) of corporate strategy and their reflection on corporate performance, financially, operationally and overall. 1.3 Study Population and Sample The population of the study consists of all Jordanian listed manufacturing firms in The reasons for selecting manufacturing firms are. First, the studied cost management tools are more applicable to manufacturing firms than other types of firms. Second, listed firms (including manufacturing firms) are subject to more stringent reporting requirements. They are supposed to apply International Accounting Standards and are subject to the Jordanian disclosure requirements. The sample for 53

3 the study consists of thirty (30) companies chosen randomly which represents around 25 % of the population. Appendix A lists the names of the sample companies. 1.4 Data Sources The researchers first looked at the annual reports of sample companies for 2010 fiscal year (published in 2011) hoping that they would include adequate information on the level of recognition, adoption and actual use of modern cost management tools. Unfortunately, there was no adequate information reported on the studied tools, therefore, a questionnaire was designed and distributed to the appropriate employees of the sample manufacturing companies (particularly vice-presidents of finance, controllers or heads of accounting departments and cost and management accountants). 2. Theoretical Background Growing local and international competition have forced management to think of new and more efficient ways to use the limited resources available to them in order to survive, first of all, and to improve as much as possible the operating results, financial position and cash flows. They began to re-examine and take actions to improve financial and non-financial activities and operations, as well as business relationships with customers, suppliers and employees. One aspect of improving management understanding of product and service costs is to shift towards applying Activity-Based Costing (ABC) techniques instead of sticking to the traditional cost accounting methods. Traditional cost accounting accumulates different overhead (OH) elements and assigns them arbitrarily to products and services based on volume of production, direct labour or machine hours. This approach ignores the real causes of cost incidence which are the activities required to produce the products and the complexity and diversity of those products. ABC traces OH costs to products in two stages. The first one identifies significant activities and assigns OH costs to each activity depending on the proportion of the company s resources it uses, thus forming activity cost pools. Then, in stage two the OH costs are allocated from each activity cost pool to each product line in proportion to the extent of the cost driver absorbed by the product line (Hilton 1999). ABC has gained world-wide acceptance since Cooper & Kaplan introduced it in It is agreed that ABC accurately determines the cost of goods, services, customers and distribution channels, thereby enabling management to set selling prices properly and competitively. Additionally, ABC forms the basis for successful application of other management initiatives such as Activity-Based Management (ABM) and Balanced Scorecards (BSC) which draw upon the knowledge created by ABC. Target Costing (TC) as another cost management tool has been developed by the Toyota Motor Company for controlling costs in the early stages of product development. Since then, several industries in different countries have adopted it including Ford, Mercedes, Nissan and Daihatsu automobile companies. Other major companies in electronic and computer industries have also adopted it (Bayou & Reinstein 1997). 54

4 To apply TC properly a company must use the marketing information it gathers in designing products with the characteristics that customers want, at selling prices that customers would pay and that would provide an acceptable level of profitability for investors (Albright 1998). Successful application of TC requires managing several interrelated components including the following (Ansari & Bell 1995); - price-led costing, - customer orientation, - focus on product and process design - cross functional teams, - life-cycle cost reduction, and - value chain involvement Properly applying the concept of TC, the Mercedes Company has successfully produced a new vehicle from concept to production in four years, on time and within budget, the M-class. Still another new cost management tool is the Balanced Scorecard (BSC). It is a new tool that complements traditional performance measures. The BSC contains a diverse set of performance measures, from the financial end to customer relations, internal business processes and organizational learning and growth activities (Kaplan & Norton 1992). This large set of performance measures is designed to capture the firm s desired business strategy and to include drivers in all areas important to the business success. The BSC is relatively costly to develop, so the net benefit of adopting it would depend on the extent of improvements in management decisions. A relatively recent survey, however, estimates that 60% of Fortune 1000 firms experimented with the BSC (Lipe & Salterio 2000). Kaplan & Norton (1996) identified four major steps in implementing the BSC: 1- clarifying and translating the vision and strategy of the company; 2- communicating and linking; 3- planning and target setting; and 4- strategic feedback and learning. The philosophy of BSC rests on the following linkage: investment in employee training leads to improvements in service quality; better service quality leads to higher customers satisfaction; higher customers satisfaction leads to increased customer loyalt and increased customer loyalty generates increased revenues and margins. Kaizen Costing (KC) is still another tool that refers to the process of gradual and incremental improvement in pursuit of perfection in business activities. Imai & Kaizen (1997) described in their book the four concepts underlying KC which are: (1) process and results, where a company should seek to apply the philosophy of Plan-Do-Check- Act to achieve continuous improvements; (2) putting quality first; (3) the next process is the customer; and (4) visual management. Finally, the concepts of Just in Time (JIT) inventory and JIT manufacturing are relatively new concepts that focus on improving inventory and manufacturing management to reduce cost and increase efficiency. JIT inventory means bringing raw materials on time when needed for manufacturing, thus minimizing capital investment in inventory, inventory holding costs and inventory loss and waste. 55

5 JIT manufacturing means producing components and products on time to fill specific orders for customers; not to stack products awaiting random demand. It requires efficient layout of plant to smooth production processes so that materials are received in the right quantity, quality and time to be placed on the production line to meet customer demands. This helps eliminate waste, defection and unnecessary movements and activities in production as well as maintaining minimal amount of inventory to reduce costs. The seven concepts to eliminate waste in manufacturing environment require the use of (Chase & Quilano, 1995): 1- focused factory network; 2- group technology; 3- quality at the source; 4- JIT production; 5- uniform plant loading 6- Konpan production control system; and 7- minimal set-up time. 3. Literature Review Al-Hmoud & Ibrahim (1997) studied the extent of use of managerial accounting techniques and capital budgeting evaluation methods by Qatar public corporations. Twenty-four companies responded to a questionnaire distributed by the researchers via mail. Their results indicate that a very high percentage (95.5%) of Qatari companies have certain employees responsible for management accounting. More than 55% of those companies employ more than 5 people in the management accounting department. However, regardless of this intensive presence of management accounting departments, the findings show that managerial accounting techniques are not adequately used by Qatari companies and there are no differences among corporate sectors in the level of use except in the case of Cost Volume Profit (CVP) analysis and in contribution return. The most use management accounting techniques were: operational budget (at 62.5% level); capital budgeting (54.2%); and CVP analysis (54.2%). Study respondents, however, agreed that management accounting techniques most significant contribution lies in the planning and control function, while most obstacles relate to top management attitudes. Alsmadi (2001) evaluated employees attitudes towards the implementation of the Japanese Kaizen model for performance improvement and meeting competitive challenges by the Jordanian private industrial sector. A sample of 870 employees was randomly selected from 30 industrial firms from three industrial estate areas in three Jordanian cities (Amman, Irbid and Zarqa). The author used a self-administered questionnaire to collect the data. The results of the study, based on 790 usable responses, show that small firms were more likely to make better use of employee potential than big firms. However, the results also indicate that employees participation in decision making concerning their work and contribution to improvement-orientated suggestions were below expectations of 56

6 Kaizen s model. He concludes that the way management looked at the concept of continuous improvement was not consistent with that of Kaizen. He recommends that firms examine their organizational culture in the light of Kaizen s requirements to identify cultural adaptation needed to apply the Kaizen model properly. Metuty (2003) examined the realized savings from the use of Just-In-Time (JIT) systems in different environments outside Japan. Specifically, he attempted to measure savings and benefits from JIT applications in developing countries. He states that the Toyota Company has been the pioneer in developing JIT systems through mutual strategic understanding and cooperation with its suppliers and customers. He further explains that JIT systems rest on two important philosophies: 1) eliminating waste in work; and 2) maintaining respect for people (employees). Eliminating waste can be achieved via: 1) avoiding excess production over actual need; 2) avoiding waiting time; 3) avoiding moving products and operations from one place to another unnecessarily; 4) avoiding excess inventory; 5) avoiding unnecessary activities; and 6) eliminating defective units. Maintaining respect for people is a key development and success factor in Japan. It is achieved through the following practices: 1- lifetime employment; 2- company union; 3- positive attitude towards workers; 4- use of automation and robots; 5- bottom-round management (bottom-up management) of operating decisions, 6- participation in provision (sub-contractor network); and 7- maintaining quality circles. Metuty further reported that although not all Japanese management practices are easy to apply (e,g., bottom-up management in decision making) even in some developed countries such as the US and Europe. However, savings and benefits from JIT application has been proven. In one study it is reported that JIT application in 80 European factories resulted in the following advantages (Chase and Quilano 1995, p. 247): A- 50% reduction in inventory; B % reduction in production time; C- more than 50% reduction in machines set-up time; and D % increase in productivity. The overall results reported by Metuty were as follows. - There are definite savings and benefits from applying JIT due to improving efficiency and eliminating non-value-added activities. However, these benefits and savings differ among different environments outside Japan even in well developed countries such the UK and USA. 57

7 - There are usually difficulties facing the application of JIT in different environments that result in different levels of savings and benefits. In addition, different companies are required to apply different mechanisms in implementing JIT depending on the characteristics of their business environments. - It is possible to realize gradually certain levels of the benefits and savings of JIT in countries that lack the precondition of successful JIT application via simulation and starting the development of reliable relationships with customers, suppliers and employees. Dekker and Smidt (2003) surveyed listed Dutch firms on the application and use of costing practices that resemble Japanese Target Costing. They found that nineteen out of thirty firms claimed to use these practices but names other than Target Costing. Adoption was highest among assembling firms and cost reduction was the main objective of these practices. The product development and design departments were leading in Target Costing processes, which are mainly performed in team structures. Other studies reported the applicability and resulting benefits of Target Costing in different environments include Kokatnur (2004) and Krupa (2008). Abu-Tayeh (2004) attempted to activate strategy management via the use of BSC. She contends that BSC is a management system rather than a measurement system. It starts at the high executive management level where it works in a team to translate organizational vision and strategy into tangible objectives and measures that balance between external and internal measures of performance. She concludes by recommending certain actions to be taken in order to apply BSC successfully. These include that organizational leaders concern themselves with obstacles to activate the organization strategies when there is: 1-inadequate understanding by employees, including executive managers, of the vision and strategy of the firm; 2-a weak linkage between strategy and resources allocated; and 3-inadequate use of feedback information and looking at tactics rather than strategies. Alsaeed (2005) studied the degree of ABC implementation in Saudi Arabia s largest 100 firms in The objectives of the study were to understand the reasons that could drive companies away from ABC, to obtain insight into the characteristics of ABC adopting firms such as size, overhead level, difficulties of instituting the system and benefits perceived from ABC implementation. The study sample consisted of the biggest 100 companies listed in the Al-Ektisadia newspaper (2003). The author does not test certain hypotheses but provides some descriptive statistics that outline the general trend of ABC use by Saudi firms. The author used a fax-survey methodology in this research as he believes it is the most appropriate method since it is less time consuming than mail, cheap and places less pressure on respondents. There were 39 responses out of the 100 questionnaires distributed which he considered acceptable given the normal response rate in this type of study. The findings of the study indicate that one-third (13 firms) of the sample applies ABC, fourteen firms identified themselves as having never considered ABC adoption, three were presently considering ABC, nine rejected it after evaluation and no firm 58

8 abandoned ABC after using it. It is also found that the finance department had been the most active participant in ABC system design, followed by the marketing department and then the production department. The characteristics of adopting firms were found to be as follows: large firms as well as firms with diversified products (5 or more products) are more likely to adopt ABC. However, contrary to expectation, there was no significant relationship between the extent of overhead cost (as a percentage of operating cost) and ABC adoption. When adopting firms were asked to rate the most important incentives to apply ABC, the following factors were rated as the highest; measuring cost accurately, measuring customer profitability, lowering operating costs, improving profitability and eliminating non-value-added activities. Zwelef & Nour (2005) examined the significance and extent of use of BSC in performance evaluation in Jordanian banks. The objectives of their study were to highlight the principles and application of BSC in banks and to illustrate its contribution to converting organizational strategy into common language used by all employees. Their sample consists of six banks randomly selected from among 16 Jordanian banks. Seventy-five copies of their study questionnaires were distributed to middle and high level managers and sixty-two were responses received. The findings of the study show that respondents believe in the advantages of BSC, especially its ability to link corporate strategy to performance measures, and that banks actually use performance indicators that relate to most BSC perspectives but not in a comprehensive way. In order for banks to apply BSC properly the authors recommend that banks construct their strategy maps according to BSC, provide adequate financial support for the implementation of BSC, educate employees in BSC and put a time frame for the adoption and operation of the system. Kaneko and Nojiri (2008) attempted to elucidate the spatial structure of Just-in-Time based logistics for the distribution of automobile parts in Japan. They shed light on the fact that, in order to accommodate distributors from remote locations, cross-docks are operated by third-party logistics providers located near car assembly plants. They added that even in JIT-based logistics economies of scale are being pursued and inventories are being stored in deliveries to car assembly plants. Cross-docks are performing an important function in making small-lot, high-frequency deliveries. Deem (2009), due to the high failure rate in Balanced Scorecard applications, investigated the relationship between organizational culture and Balanced Scorecard effectiveness. She collected survey data from employees working in large county government organization on both self assessment for Balanced Scorecard effectiveness and organization culture assessment based on the Dension organizational culture survey instrument (OCSI). The survey results showed that four organizational traits (Involvement, Consistency, Adaptability and Mission) as well as organizational leaning are significantly related to Balanced Scorecard effectiveness. Ghani et al. (2010) examined whether the high level of BSC adoption in Malaysian local authorities leads to a high service quality. Their findings, based on a questionnaire survey, indicate that adopting BSC as a performance measure does affect service quality. They found a significant difference in the service quality 59

9 between organization that have a high level of BSC adoption compared to those who have a low level of adoption. Al-khadash & Nassar (2010) investigated the improvement in financial performance associated with the use of Activity-Based Costing. Depending on a cross-sectional mail survey of 65 Jordanian financial managers and other data obtained from the Jordanian shareholding companies as of the end of 2009, they found that the awareness level of using ABC is high among the financial managers but the ABC implementation level is not high. They also found a positive association between ABC and the improvement of ROI. Yazdifar and Askarany (2011) examined the factors contributing to the adoption of Target Costing (TC) systems in manufacturing and service firms in the UK, Australia and New Zealand. They relied on a survey methodology distributed among CIMAqualified accountants working in manufacturing and service firms in the three countries. They specifically examined the importance of the following TC attributes; relative advantage, compatibility, ease of use, results demonstrability and ability for decision makers to adopt and implement TC. Their results indicate that TC is equally prevalent among manufacturing and service firms while in terms of the levels of implementation there is a significant difference between the two types of firm. Olabisi et al. (2012) examined the relationship between cost management techniques and profitability of small and medium scale enterprise (SME) in Ogun state, Nigeria. The study's sample consisted of 269 respondents of SMEs purposively chosen from agro-allied, confectionery, general trading and transport businesses. A structured questionnaire was used to obtain information on the relevant variables. The results show that there is a significant relationship between the Kaizen cost management technique and the profitability of SMEs. 3.1 Contribution of the Study This study contributes to the existing body of accounting research in two unique ways. First, it identifies the different stages of application of the studied cost management tools, ranging from not adopted the tool at all, to desire to adopt but face difficulties, in preparation for adoption, partial adoption and full adoption. Second, it is more comprehensive than any other study in its field as it examines the stage and level of adoption of six cost management tools and their perceived impact on corporate accounting and market performance at one time while most other studies focus on an individual tool at a time. 3.2 Hypotheses of the Study In order to analyze the data gathered about the study problem and to answer the questions underlying it, the following hypotheses were developed in their null forms. Hypothesis 1: Jordanian manufacturing companies do not adopt Just in Time (JIT) inventory policy. Hypothesis 2: Jordanian manufacturing companies do not adopt JIT manufacturing policy. 60

10 Hypothesis 3: Jordanian manufacturing companies do not adopt Activity Based Costing policy. Hypothesis 4: Jordanian manufacturing companies do not adopt Target Costing policy. Hypothesis 5: Jordanian manufacturing companies do not adopt Kaizen Costing policy. Hypothesis 6: Jordanian manufacturing companies do not adopt Balanced Scorecard policy. Hypothesis 7: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s operating efficiency. Hypothesis 8: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s relationships with customers. Hypothesis 9: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s relationships with employees. Hypothesis 10: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s accounting performance. Hypothesis 11: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s market performance. 4. Study Methodology As mentioned earlier, the authors started by reviewing several annual reports of sample manufacturing companies. This review did not reveal any significant disclosure with regards to the adoption and use of any recent cost and management accounting tools, therefore, the authors had to resort to the questionnaire approach to collect the relevant data for analysis and hypotheses testing. A 5-part questionnaire was developed and refereed. The first part of it consists of six items that relate to the personal characteristics of respondents. The second part consists of six items also and relates to corporate characteristics. The third part consists of five items and relates to the degree of adoption of recent cost and management accounting tools. The adoption level was measured on a 4-point scale (similar to that of Likert) starting with the level of no adoption (given zero point) and moving to the level of desire to adopt but face difficulties (given 1 point), desire to adopt but still in the preparation stage (given 2 points), partial adoption (given 3 points) and comprehensive adoption (given 4 points). For the purpose of hypotheses testing, the t statistic was computed for the difference between the actual mean of adoption and the hypothesized mean of adoption (which equals 2) given the standard deviation of the actual mean and the sample size. The fourth part consists of two items, one relates to the types of difficulty facing companies in adoption. The second relates to the ways respondents have learned about those recent cost and management accounting tools. The last part consists of thirty-nine items covering the different advantages of adopting each of the recent cost and management accounting tools as well as the perceived impact of these advantages on corporate performance. The opinion of the respondents towards each advantage was measured on a 5-point 61

11 Likert scale (very much agree, agree, neutral, disagree and very much disagree and given 5 to 1 point, respectively). 4.1 Sample Selection As mentioned earlier, the study population consists of all listed manufacturing companies in 2010 and the sample is made of 30 companies randomly selected. Appendix A lists the names of the sample companies. Sixty-four copies of the questionnaire were distributed to vice-presidents finance, heads of accounting departments and cost and/or management accountants in the rate of 2 3 copies per company depending on targeted respondents willingness to cooperate. Forty-seven responses were received, 5 of them were unusable which resulted in a response rate of 65.6% (42 out of 64). So the study analysis and hypotheses testing are based on the opinions of 42 respondents from 30 manufacturing companies operating in various fields of the sector. 4.2 Questionnaire Validity and Reliability After the initial questionnaire was prepared it was reviewed by several colleagues in the field of accounting education and research. All applicable modifications to the questionnaire were incorporated in the final form of it. Furthermore, the reliability of the questionnaire was tested via Cronbach Alpha. The average score of this test was 0.83 which is a good validity level. 5. Data Analysis and Results Before testing the hypotheses, let us look at the characteristics of the respondents, the corporations they represent, the degree of corporate adoption of recent cost and management accounting tools and the difficulties facing those companies in adoption. Table (1) shows the distribution of respondents based on gender, academic qualifications, specialization, position held, experience and the possession of professional certificate. It appears from the Table that most respondents were male (92.9%). This probably indicates that financial positions in Jordanian manufacturing companies are still largely occupied by males. The Table also indicates most respondents hold a Bachelor degree (71.4%), followed by the holders of graduate degrees (23.8%). Table (1) also shows that most respondents specialize in accounting (69.1%), followed by management (16.7%). This finding agrees with expectation that most people who deal with performance matters would most likely specialize in accounting. This is further confirmed by the distribution of respondents based on positions held. As the contents of the Table indicate that most respondents occupy Cost Accountant positions (50%), followed by Head of Accounting Department position (19,1%). Finally, the Table shows respondents distribution based on experience and professional certificates held. As is clear from the contents of the Table 26.2% of respondents have between 3 and less than 6 years of experience, while 23.8% of respondents have between 6 and less than 10 years of experience and an equal 62

12 percentage have more than 10 years of experience. Concerning the level of possessing professional certificates in accounting fields the Table shows that only three respondents hold CMA certificates and four respondents hold CPA certificates. As with regards to corporate characteristics, Table 2 shows these characteristics on different levels as follows. The average age of corporations where most respondents come from is more than 15 years (35.7%), the average capital of most corporations represented is less than one million JD (54.8%), the average number of employees of most corporations represented is more than 150 (28.5%). Most corporations represented produce a single main Table (1) Respondents Distribution Based on Different Characteristics Characteristic: Number Percent Cum. Percent Sex Male Female Academic Degree Less than Bachelor Bachelor Graduate Specialization Accounting Management Finance Other Position Held Vice President Finance Finance Director Head of Accounting Department Cost Accountant Not specified Experience Less than 3 years years- less than years-less than More than 10 years Not specified Professional Certificate CMA CPA None product (33.3%), followed by those that produce multiple main products and multiple by-products (23.8%). In addition, most corporations represented produce final products (35.6%), while (31%) of them produce intermediate products and another 63

13 31% produce miscellaneous products. Finally, the Table shows than most corporations represented produce for and sell in the local as well as outside markets (57.1%), followed by those that produce for the local market alone (40.5%). Table (2) Corporate Characteristics Corporate Age Number Percent Percent Less than 5 years to less than 10 years to less than 15 years More than 15 years No answer Corporate Capital Less than 1 million to less than 5 millions to less than 10 millions More than 10 millions Number of Employees Less than to less than to less than to less than More than No answer Number of Products One main product One main product plus multiple Byproducts Multiple main products Multiple main products plus multiple byproducts No answer Type of Products Final products Intermediate products Mixed products No answer Corporate markets Local markets alone Outside markets alone Local and outside markets Table (3) shows corporate adoption levels of each of the cost and management accounting tools. The Table indicates that 28.6% of respondents agree that their companies do apply comprehensively each of the following three tools: JIT inventory, JIT manufacturing and Activity-Based Costing (ABC) and almost similar percentages do not apply any of these tools (28.6%, 26.2% and 26.2%, respectively), while between 40,5-45,2% adopt them partially. The Table (3) also shows that the Balanced Scorecard (BSC) is the most adopted tool (whether fully or partially 73.85= 64

14 42.8%+31%), followed by ABC (69.1%= 40.5%+ 28.6%) and Kaizen Costing is the least adopted (31%+21.4%=52.4%). With regards to the tools that corporations wish to apply but face difficulties in doing so it is with Target Costing (TC) that corporations face most difficulties (7.1%). Tool: Table (3) Level of Corporate Adoption of Recent Cost and Management Accounting Tool (in percent) Not Adopte d Desire to adopt but face difficulties In Preparation for adoption Partial Adoption Full Adoption JIT Inventory JIT Manufacturing Activity Based Costing Target Costing Kaizen Costing Balanced Scorecard Table (4) lists the types of difficulties that face corporations when trying to apply the cost and management accounting tools. The Table shows that the most common difficulty facing companies is the high cost of implementation (42.9%), followed by the lack of specialized persons to apply the tool successfully (23.8%). However, lack of management s support emerged as one of the least encountered difficulties (9.5%). Table (4) Difficulties Facing Corporation When Trying to Adopt Tools Type of Difficulty Number Percent Lack of Management Support Lack of Specialists High Cost of Implementation Lack of Employees Participation Other (not specified) Total Table (5) shows how respondents have learned about the new cost and management accounting tools. The Table indicates that most respondents have learned about those tools during their academic studies (47.6%), while about 12% of them have learned about the tools via their own reading (in journals, books and other media). Furthermore, when respondents were asked whether they joined certain training courses, workshops or a conferences on the tools, one-third of them answered Yes and around two-thirds answered No. 65

15 Table (5) Methods of Learning about Tools Method of Learning: Number Percent Via academic studies Via own reading Via training course, workshop or conference No Answer Total Hypotheses Testing and Findings Hypothesis 1 in its null form states that: Jordanian manufacturing companies do not adopt Just-in-Time (JIT) inventory policy. Table (6) shows the test results of this hypothesis. It is clear from the Table that the mean of using JIT inventory is 2.43 out of 4 (with a standards deviation of 1.61). Based on the one-sample T test, this mean is significantly greater than the hypothesized mean of 2 at the 0.01 significance level and thus the null hypothesis could be rejected and we may conclude that respondents agree that Jordanian manufacturing firms do, on average, partially or fully, follow JIT inventory policy. Table (6) One sample t test of the adoption of JIT Inventory Mean Std T D.F. Sig. Deviation Hypothesis 2 in its null form states that: Jordanian manufacturing companies do not adopt JIT manufacturing policy. Table (7) shows the test results of this hypothesis. It is clear from the Table that the mean of using JIT manufacturing is 2.5 (with a standards deviation of 1.57). Based on the one-sample T test, this mean is significantly greater than 2 at the 0.01 level and thus the null hypothesis could be rejected and we may conclude that respondents agree that Jordanian manufacturing firms do, on average, partially or fully, follow JIT manufacturing policy. Hypothesis 3 in its null form states that: Jordanian manufacturing companies do not adopt Activity-Based Costing policy. Table (8) shows the test results of this hypothesis. It is clear from the Table that the mean of using ABC is 2.4 (with a standards deviation of 1.59). Based on the one sample T test, this mean is significantly greater than 2 at the 0.01 level and thus the null hypothesis could be rejected and we may conclude that respondents agree that Jordanian manufacturing firms do, on average, partially or fully, adopt ABC policy. 66

16 Table (7) One sample t test of the adoption of JIT Manufacturing Mean Std T D.F. Sig. Deviation Table (8) One sample t test of the adoption of ABC Mean Std T D.F. Sig. Deviation Hypothesis 4 in its null form states that: Jordanian manufacturing companies do not adopt Target Costing policy. Table (9) shows the test results of this hypothesis. It is clear from the Table that the mean of using TC is 2.12 (with a standards deviation of 1.6). Based on the onesample T test, this mean is not significantly greater than 2 (the significance level is 0.01) and thus the null hypothesis could not be rejected and we may conclude that respondents do not agree that Jordanian manufacturing firms do adopt TC policy.. Hypothesis 5 in its null form states that: Jordanian manufacturing companies do not adopt Kaizen Costing policy. Table (10) shows the test results of this hypothesis. It is clear from the Table that the mean of using KC is 1.91 (with a standards deviation of 1.69). Based on the onesample T test, this mean is not greater than 2 and thus the null hypothesis could not be rejected and we may conclude that respondents do not agree that Jordanian manufacturing firms do follow KC policy. Hypothesis 6 in its null form states that: Jordanian manufacturing companies do not adopt Balanced Scorecard policy. Table (11) shows the test results of this hypothesis. It is clear from the Table that the mean of using BSC is 2.55 (with a standards deviation of 1.54). Based on the onesample T test, this mean is significantly greater than 2 at the 0.01 level and thus the null hypothesis could be rejected and we may conclude that respondents agree that Jordanian manufacturing firms do, on average, fully or partially, follow BSC policy. Hypothesis 7 in its null form states that: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing companies operating efficiency. Table (12) shows the mean perceived effect of adopting recent cost and management accounting tool on each of several operating efficiency indicators. This effect is measured using a 5-point Likert scale (from very much agree with 5 points to a very much disagree with one point). The Table 12 also shows, the test results of this hypothesis. It is clear from the contents of the Table that the overall-mean perceived effect of adopting recent cost and management accounting tools on operating 67

17 efficiency is 4.08 (with a standards deviation of.67). Based on the one-sample T test, this mean is significantly greater than the hypothesized mean of 3 at the level and thus the null hypothesis could be rejected and we may conclude that respondents perceive there will be a positive effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s operating efficiency. Table (9) One sample t test on the adoption of TC Mean Std T D.F. Sig. Deviation Table (10) One sample t test of the adoption of KC Mean Std T D.F. Sig. Deviation Table (11) One sample t test of the adoption of BSC Policy Mean Std T D.F. Sig. Deviation Hypothesis 8 in its null form states that: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing companies relation with customers. Table (13) shows the mean perceived effect of adopting recent cost and management accounting tool on each of several indicators of a company s relation with customers. The Table 13 also shows the test results of this hypothesis. It is clear from the Table that the overall-mean perceived effect of adopting recent cost and management accounting tools on company s relation with customers is 4.10 (with a standard deviation of.72). 68

18 Table (12) Perceived Effect of Adopting Recent Cost & Management Accounting Tools on Corporate Operating Efficiency Adopting Recent Cost and Management Accounting Tools Leads to: Increased efficiency in products Design Obtaining raw materials and components in the right quantity, quality and time Increased productivity of human Resources Increased efficiency in production Operations Better understanding of products Contribution More efficient and smoother organization of production machinery and equipment s Successful translation of corporate strategy to understandable operating concepts Mean Std. Deviation Increased efficiency in the overall activities of the corporation Overall 4.08* 0.67 *This overall mean is significant at level Based on the one-sample T test, this mean is significantly greater than 3 at the level and thus the null hypothesis could be rejected and we may conclude that respondents perceive there will be a positive effect of adopting recent cost and management accounting tools on company s relationships with customers. Hypothesis 9 in its null form states that: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s relation with employees. Table (14) shows the mean perceived effect of adopting recent cost and management accounting tool on each of several indicators of company s relation with employees. The Table also shows the test results of this hypothesis. It is clear from the Table the overall mean perceived effect of adopting recent cost and management accounting tools on company s relationships with employees is 3.96 (with a standard deviation of.75). Based on the one-sample T test, this overall mean is significantly greater than 3 at the level. Thus the null hypothesis could be rejected and we may conclude that respondents perceive there will be a positive effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s relationships with employees. 69

19 Table (13) Perceived Effect of Adopting Recent Cost & Management Accounting Tools on Corporate Relation with Customers Adopting Recent Cost and Management Accounting Tools lead to: Mean Std. Deviation Improved quality of products Improved communication and cooperation with customers Improved services provided to Customers Increased customers satisfaction Increased customer retention Better classification of current customers based on needs and desires Better prediction of customers future needs Better ability to acquire new customers Better corporate competitive position Better product pricing policies Overall * *This overall mean is significant at level Table (14) Perceived Effect of Adopting Recent Cost & Management Accounting Tools on Corporate Relation with Employees Adopting Recent Cost and Management Accounting Tools lead to: Mean Std. Deviation Better employees understanding of their responsibilities and duties Better employees satisfaction Better human resources employment and compensations policies Increased employees knowledge and readiness to achieve corporate objectives Increased employees productivity Overall *This overall mean is significant at level. Hypothesis 10 in its null form states that: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing companies accounting performance. 70

20 Table (15) shows the mean perceived effect of adopting recent cost and management accounting tool on each of several company accounting performance indicators. The Table also shows the test results of this hypothesis. It is clear from the Table that the overall mean perceived effect of adopting recent cost and management accounting tools on company s accounting performance is 4.02 (with a standard deviation of 0.69). Based on the one-sample T test, this overall mean is significantly greater than 3 at the level and thus the null hypothesis could be rejected and we may conclude that respondents perceive there will be a positive effect of adopting recent cost and management accounting tools on Jordanian manufacturing company s accounting performance. Table (15) Perceived Effect of Adopting Recent Cost & Management Accounting Tools on Corporate Accounting Performance Adopting Recent Cost and Management Accounting Tools lead to: Mean Std. Deviation Lowering product costs More productive use of available resources Increased customer profitability Better product costing and profit Determination Improved operating profit Higher return on assets Higher return on equity Better profit planning Smoother budget preparation More control over budget variances Better ability to eliminate non value added activities Better liquidity management Overall * *This overall mean is significant at level Hypothesis 11 in its null form states that: There is no perceived effect of adopting recent cost and management accounting tools on Jordanian manufacturing companies market performance. Table (16) shows the mean perceived effect of adopting recent cost and management accounting tool on each of several company market performance indicators. The Table also shows the test results of this hypothesis. It is clear from the Table that the overall mean perceived effect of adopting recent cost and management accounting tools on market performance is 3.79 (with a standard deviation of 0.80). Based on the one-sample T test, this overall mean is significantly greater than 3 at the level and thus the null hypothesis could be rejected and we may conclude that respondents perceive there will a positive effect of adopting recent cost and management accounting tool on Jordanian manufacturing company s market performance. 71