A Study On The Relationship Of Corporate Contextual Factors, Product Costing Systems Sophistication And Product Costing Systems Effectiveness

Ministry of Finance of the People’s Republic of China promulgated corporateproduct cost accounting system (exposure draft) on9February2012, which wouldfirstly attempt to implement activity-based costing (ABC) in the accounting system.However, due to the high complexity and cost of the ABC implementation, thereexited the ABC paradox in the foreign enterprises practice. Then the influencingfactors and economic consequences of the ABC system design and implementationbecame a research hotspot. At present, the numbers of Chinese enterprises that areusing ABC gradually increase. The context of Chinese enterprises is different fromWestern countries. Therefore, the research on the antecedents and consequences ofproduct costing systems design choices of Chinese enterprises is of greatsignificance in theory and reality.Determining the sophistication of product costing systems is the core of productcosting systems design, and the factors influencing product costing systemssophistication and effectiveness are the focus of product costing systems designchoices. Based on contingency theory, the dissertation studies the relationship ofcorporate contextual factors, product costing systems sophistication and productcosting systems effectiveness through a questionnaire survey of manufacturingenterprises in China. On the one hand, the definition and measurement of productcosting systems sophistication is extended; On the other hand, the use of structuralequation modeling approach not only solves the problem of multi-dimensionalmeasurement of the study variables, but also gives an in-depth analysis of the pathrelationship of the influencing factors.First, the dissertation reviews the relevant research literatures. The conceptualmodels of the influencing factors of product costing systems sophistication andproduct costing systems effectiveness are constructed by theoretical analysis, andthen research hypothesis are put forward. According to the data from the survey of206manufacturing enterprises in China, an empirical test is made on the conceptualmodels and research hypothesis.The research shows that, the intensity of competition,perceived environmental uncertainty, organizational size, the level of formalizationand the level of advanced management techniques have a significant positive impacton product costing systems sophistication. The intensity of competition, perceived environmental uncertainty, competitive strategy, organizational size and the level ofadvanced manufacturing technology have a significant positive impact on purposesof use of product costing systems. Purposes of use of product costing systems have asignificant positive impact on product costing systems sophistication. The effect ofvarious factors on product costing systems sophistication could be order from greatto small as following: organizational size, the level of formalization, purposes of useof product costing systems, the level of advanced management techniques, theintensity of competition, perceived environmental uncertainty, the level of advancedmanufacturing technology, competitive strategy. Both purposes of use of productcosting systems and product costing systems sophistication have a significantpositive impact on product costing systems effectiveness, but product costingsystems sophistication affects on product costing systems effectiveness to a lesserextent than purposes of use of product costing systems. Moreover, the research alsohas found that product costing systems sophistication of listed companies issignificantly higher than non-listed companies, which reflects that the application ofadvanced management accounting methods for listed companies is carried out better.According to research conclusions, two suggestions are given for the reformation ofcost management of Chinese enterprises, especially for the use of ABC.