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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Addis Ababa University


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.



Activity based costing system, Costing system