Study on Construction Cost Accounting System of State Owned Road Contractor: A Case Study on Ethiopian Construction Works Corporations – Transport Infrastructure Sector
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Date
2020
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa University
Abstract
This research investigated the cost accounting system of state-owned road contractor by
taking Ethiopian Construction Works Cooperation‟s transport infrastructure sector as a
case study. The construction industry consumes different resources such as, material,
manpower and equipment which have to be managed properly to ascertain the profit. The
research is based on the problem of ascertaining the cost of each cost object in order to
evaluate the project status and helps the decision makers to make corrective measure on
time. The proper implementation of costing system is necessary to determine the
profitability of each cost object whereby management can identify whether the cost
object is contributing profit or loss. Both primary and secondary data collection were
used in this research. The primary data were obtained from the company using a
questionnaire and secondary data were obtained from company cost records, reports, and
cost accounting implementation manuals. Desk studies by randomly selecting three
ongoing projects were done for detail study on current system. Based on the collected
data, the detailed analysis has been conducted to find answers for the research question
and modified costing system was proposed.
The study found out that the organization does not have a structured and typical cost
accounting system. The respondents revealed that the company‟s current system is weak
when evaluating based on different requirements of the costing system. According to the
research, the ability of the current system in providing relevant information to decisionmakers
for
future
planning
and
decision
making
is
poor.
Lack
of
training
on
updated
cost
accounting
techniques,
difficulties
in
data
collecting
and
gathering,
and
lack
of
adequate
information
on cost data are the mostly occurred problem during implementing costing
system in the organization. It is recommended that the company should use the proposed
system of cost accounting to overcome the shortcoming of the current system based on
the data findings. The proposed costing system is expected to improve responsibility
center identification, cost determination, indirect cost allocation, variance analysis at
activity and resource level and data presenting format.
Description
Keywords
Activity based costing system, Costing system