Please use this identifier to cite or link to this item: https://www.um.edu.mt/library/oar/handle/123456789/3424
Title: A case study on the relevance of indirect costs (overheads) allocation in selected SME's in Malta as a basis for decision making
Authors: Zahra, Dex Carlos
Keywords: Competition
Pricing
Business enterprises -- Malta
Managerial accounting -- Malta
Issue Date: 2011
Abstract: Purpose: To study the relevance that overheads have for decision making within the local manufacturing environment. The topic was primarily chosen as no previous studies were conducted in this area within the local scenario and to compare the theoretical principles with the practical aspects of management accounting. Design: The research was based on a comparative case study between four local small and medium sized manufacturing organisations (SME's). In depth semi-structured interviewees and direct observations were chosen as the primary research tools, together with secondary data, mainly consisting of financial reports and other relevant documents submitted by the interviewees. Findings: A positive view towards the strategic role of management accounting was observed. Despite the various criticisms outlined in contemporary management accounting regarding Traditional Costing Techniques (TCTs), all of the interviewed organisations are still making use of such techniques for the allocation of overheads, while Activity Based Costing is not used. Moreover the study outlines the difficulties being encountered for price setting mainly due to 'cut-throat' competition within the market, leaving minimal room for the SME but to be a price-taker. Conclusion: The results were conclusive in terms of identifying overheads as a relevant factor for decision making, yet the same results were inconclusive as to the efficiency and reliability of the process with which overheads are allocated to products within the manufacturing context. ii Implications: Since overheads are deemed to be a relevant aspect for decision making, a strategic approach for the control and allocation of such overheads needs to be constantly maintained. However, since the reliability and efficiency of overhead absorption could not be determined, at its worst this could imply that organisations are creating a situation of product cross subsidisation, which in turn deteriorates long-term profitability
Description: B.ACCTY.(HONS)
URI: https://www.um.edu.mt/library/oar//handle/123456789/3424
Appears in Collections:Dissertations - FacEma - 2011
Dissertations - FacEMAAcc - 2011

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