Study the effect of manufacturing environment factors and activity-based cost measurement system on performance

Cost measurement system is an important management tool that emphasizes the allocation of overhead costs in order to provide relevant information for improved decisionmaking. Theory suggests that product diversity, cost structure, competition, quality of information system, and management support  are major determinants of the demand for  more accurate costing systems, and are also important factors for a successful application of more advanced costing systems. Given the debate in the literature on the effectiveness of activitybased costing ABC systems in the contemporary business environment, there is a need to understand more about the impact of ABC systems on company performance. The purpose of this research is to examine and analyze the performance changes that are associated with the use of ABC systems within specific manufacturing environmental factors. The study was conducted on an Egyptian manufacturing company, which recently applied ABC system. The study results indicate that improving cost measurement system in a company characterized with high fixed costs, high indirect costs, and product diversity has a significant positive effect on both operational and financial performance indicators within the context of management support. In addition, there is evidence that weak information system has its considerable constrains on cost measurement system design in terms of level of details, cost classification, and number of cost drivers for instance.