Small-Medium Enterprises’ Responsibilities And Activity Based Costing (ABC) Or Traditional Cost

Research Background

Small-to-medium size enterprises (abbreviated as SME) are functioningin hugeburdenso as toremain competitive in thecurrent economy worldwide. Also, there exists range ofstratagems for small sized enterprises for attainingeffective ways of market reaction, costsavings, and financial effectiveness. Also, these take incontractconcerning established approaches of management regarding supply chain and enhanced accounting framework. In essence, the significantpurpose of the current article is to represent the base and process behind ABC costing and to find out the advantages of utilizing ABC over and above traditional systemof withinsmall as well as medium sized enterprises (SMEs).

The environment of business, particularly forsmall and medium sized corporations isalteringon a regular basis. Therefore, SMEs have the need to modernize and upgrade their systems of accounting often so as toremain competitive and to augmentbusiness profitability (Foroughi et al., 2017). As rightly indicated by AlKhajeh and Khalid (2018), activity-based costing emphasizes actions that consume varied resources of particularly costs of driver and SMEs (Ríos-Manríquez et al., 2014). Consequently, the small as well as medium sized corporations moving forwardthe most from employment of ABC (activity based costing technique) would be necessarily SMEs with a striking quantity of expensesimpacting to a range of actions in giving commodities towards the consumers who has a changing demand. Again, it can be hereby mentioned that in case if SMEs have very lessor no overhead expenditure of production and produces products that are almost indistinguishable that demands similar care for each product, the need for ABC can be changed (Hall & McPeak, 2011).. This present discussionchecks the various issuesconcerning both technical and managerial in relation to themodel of activity-based costing (ABC). 

Small-Medium Enterprises’ Responsibilities and Activity Based Costing (ABC) or Traditional Cost

• To critically examineoverall effectiveness of utilizing traditional cost accounting in particularly SMEs
• To examine efficacy of using accounting based on activity within particularly SMEs
• To evaluate advantages of using accounting based on activity within particularly SMEs
• To assess overall limitation of taking up activity-based accounting in essentially SMEs

• What is the effectiveness of the TCA or traditionalsystem of cost accounting in the context of the SMEs?
• What is the effectiveness of theABC activity based accounting in the context of theSMEs?
• Which are the benefitsof implementation ofABC activity based accounting in the context of the SMEs?
• Which are the disadvantages of implementation of ABC activity based accounting in the context of the SMEs?
• Which are the advised strategies for reduction restrictionsof implementation of ABC activity based accounting in the context of the SMEs?

Examination of effectiveness oftraditional cost accounting (TCA) for SMEs

As suggested by Namazi (2016), traditional costing system can be considered to be an accounting mechanism that is utilized for prediction of profits. Essentially, this mechanism utilizes cause and effect mechanisms and considers both direct/indirect costs along with expends in a corporation.

Traditional cost accounting mechanism can be said to be effective for small as well as medium enterprises (SMEs) as this method is quite simple. SMEs can enumerate this specific rate by means of pooling different indirect costs and implementing the same equally in an ascertained common unit (for ex, machine hours) (Foroughi et al., 2017). Thereafter, management of firms enumerates the costs of each and every product/service utilizing identical rate. Particularly, this can be considered to be comparatively less intricate than the alternative mechanism of activity cost mechanism, that enumerates the cost of each and every product/service founded on definite expends.

Aims and Objectives

As this method is considered to be less intricate than activity cost, accountants of corporation do not face the need to spend time performing calculations for traditional cost mechanisms. Therefore, traditional cost is considered to be less pricey than activity costing.

There are different corporations that prefer traditional costing as they comprehend it properly and trust company’s reliability. This remains effectual at the time when overhead is at a low level to specific direct costs (Ahmad, 2017).

Business concerns (small and medium sized ones) often utilize traditional costing mechanisms in financial assertions as outsiders can evaluate overall value of products/services in a simple manner.

In addition to this, traditional cost can be said to be best utilized at the time when overhead of a firm is relatively low in comparison to direct production costs (Yang & Chang, 2018). This necessarily provides reasonably appropriate cost figures at the time when production volume is huge and alterations in overhead costs do not generate a substantial variation when enumerating production costs. Essentially, traditional costing mechanisms are inexpensive to execute. Small as well as medium sized enterprises normally make use of traditional costing for external report as it is quite simpler and at the same time simpler for outsiders to comprehend. Nevertheless, it does not provide manager accurate image of costs of products as the rates applicable of the overhead load is quite illogical and implemented equally to costs of different products. In essence, overhead costs are necessarily not allocated to different products that in actual fact consume different overhead actions (Ngubane et al., 2015). Intrinsically, traditional mechanisms of costing is said to be best utilized for different manufacturers that only produce different products.

Activity based costing can be said to be very accurate, however, it is said to be the most intricate one to implement. Essentially, it is more suitable for business corporations having higher overhead costs in place of companies that deliver services. SMEs can implement activity based system of costing as this can help in the process of presentation of accurate costs of products by means of concentrating on specific causes as well as effect associations in cases of cost incurrence (Kalkhouran et al., 2017). This identifies that it is actions that generate costs and not the products; thereby it is product that necessarily consume actions.

Management of SMEs can implement activity based costing mechanisms as ABC detects the actual nature and behavior of costs and aids in decreasing costs and recognizing actions that do not attach value to firms’ products. Thus, by means of implementation of ABC system of costing, managers of corporations can control different several fixed costs of overhead by exercising higher level of control over the actions that have generated said fixed overhead costs (Potkany et al., 2016). Also, implementation of ABC can help in different actions that are necessarily within as well as beyond the SME to track greater number of overheads to company’s products. Implementation of ABC can also help in enhancing decision making procedures since they can utilize more dependable data on product cost. Again, implementation of ABC, by means of procedures of pooling of different activity costs and recognition of drivers of cost can direct the way towards a wide range of applications. Furthermore, small and medium sized business concerns operating in the service industry have different features than manufacturing corporations. Service business concerns have approximately no direct costs and majority of costs can be considered to be overheads and they not necessarily hold stocks of essentially service since the service is essentially consumed at the time when it is developed (Kustiningsih et al., 2017). Ahmad (2017) suggests that ABC mechanisms can deliver superior quality of information on costing and aid the management to carry out their task effectively and acquire better comprehension regarding competitive advantage of firms along with strengths as well as weaknesses of small sized enterprises. Often, managers have the requirement of a superior system of costing namely ABC. Also, ABC system also has greater influence on corporations that have areas with huge, escalating expends and have several products/services, number of customers, procedures otherwise a combination of all the identified factors (Bruwer et al., 2017). Essentially, business concerns that assume both small as well as large orders, present standard and at the same time tailored deliveries can take into consideration implementation of ABC based system of costing.

Research Questions

Armitageet al.(2016) asserts that ABC is the most effective when there exists numerous overheads and different products. In any specific environment there exists numerous overheads and ABC cannot be considered to be worthy and is not considered to deliver insights Similarly, ABC is said to be irrelevant in any kind of business that markets a single product or that delivers an individual service that is normally the case in small as well as medium enterprises (Sunarni, 2015).

The primary limitations of activity based costing in SMEs are that this mechanism is quite pricey to execute and at the same time maintain (Sung et al., 2018). Also, ABC systems of costing generate reports that are necessarily different from profit/loss declarations generated by means of traditional methods of costing (Dwivedi & Chakraborty, 2016). Since, majority of corporations are utilizing traditional systems of costing, there remains variation on the basis of costing as well as financial pronouncements of the two different firms operating in identical industry and cannot be compared. Again, adaptability to different ABC systems accounting is not appropriate for different types of corporations (particularly, small as well as medium sized corporations) do not have several resources. There are numerous actions and size of business transactions is observed to be extremely low.

In addition to this, data generated by means of ABC costing mechanisms can be misinterpreted and this in turn can direct the way towards wrong business decisions (Rizwan et al., 2018). Essentially, ABC systems of costing does not necessarily adhere to standard regulations (say, GAAP) and business concerns face the need to present the reports (for both internal as well as external requirements) by means of utilizing traditional together with ABC systems both at once. Sunarni (2015) suggests that in case of ABC system of costing, costs are necessarily allocated on the basis of drivers and actions are undertaken to produce the product. Intrinsically, this delivers accurate and appropriatemechanisms of allocations of costs to different products. However, there exists a threat of over or else under costing of products when inappropriate drivers of costs or else activities are assigned to different products.

As suggested by Kazemi and Zadeh (2015), implementation of ABC system can be considered to be a large project that calls for substantial resources. This resource when implemented can be said to be pricey to implement. Essentially, data regarding numerous activity dimensions need to be gathered, examined and entered into the specific system. Also, ABC generates numbers namely margins of products that are necessarily odds with the particular numbers generated by the traditional systems of costing. However, managers are familiarized to utilizing traditional methods of costing to undertake their operations. In particular, traditional costing systems are often utilized in analysis of performance. Essentially, activity based system of costing can get misinterpreted and need to be utilized when employed in the process of decision making (Hada et al., 2014).

Research Requirement Discussion

Large, huge-profile, international firms accept an overpoweringlyhigher amount of attention from the media and recognition of name. However, as the subsequent facts recognize, role of small as well as medium sized enterprises (SMEs) (ones having lower than 500 employees) in the case in the U.S., plus the financial system of free-market countries around the planet, is noteworthy.

SMEs necessarily deliver the capability to bridge the slit particularly between rich people and the poor ones in different growing economies, by presenting prospects of employment to individuals who are not truly employable by large sized firms (Siguenza-Guzman et al., 2016). Particularly, SMEs can be regarded to be the nursery for huge sizedcorporationsin the upcoming period, contributing considerably to cumulativesavings, and augmentationof technology and level of investment. Hudakova and Bajus (2015) suggest that SMEs are necessarily incubators for drivinginnovation along withaugmentationin employment, in both developed along withdeveloping nations. In addition to this, SMEs can help out developing nations in the process of transition from agrarian-based communities to different manufacturing-based economies and to make progress from instabilities generated by war. Industrialists in SME section can be regarded to be significantdrivers of development in a specific economy. Essentially, creation of job in different SMEs calls for low capital expends, that is necessarily important for developing nations (Fisher and Krumwiede, 2015).

An addedimportantfunction of the segment of Small/medium sized firms is the prospect it delivers to women, particularly in diversedeveloped along withgrowingnations. However, this is done in a bid to become significant players in both micro level and small enterprises (Phan et al., 2014).

Small as well as medium sized enterprises (SMEs)encountered considerably greater difficulties than larger nations in the process of recovering from global recession of the period 2008 (Parker, 2016). Essentially, one of the main issues, encountered by firms both during the period of recovery in addition toprocess of moving forward into the upcoming period can be regarded to be important for cost reduction. Krumwiede and Charles (2014) observed that SMEs can reduce costs as they recovered from period of recession. However, there was relativelylittlenumber of developed nations that conducted a cost-decreasingscheme. The majorityof the companies carry on to utilizeconventional, volume-based meansof costing that againfailinascertainingrealand tangible costs along withdegree of competitiveness of firms. The general issues usually faced by SMEs intending to enter worldwide markets contain inadequacy of formalized operations and superior quality standards, higher costs, language, cultural obstacle, bureaucratic difficulties, restricted management together with other employee competence, conventional, often informal accounting exercises (Charaf & Rahmouni, 2014).

Examination of effectiveness of traditional cost accounting (TCA) for SMEs

Maruszewska (2015) put forward the fact that SMEs that happen to be the builders of the civil societyreflect animportantsection of commerce globally. This provides employment to majority of individualsglobally, facilitating innovation, attracting and at the same time retaining talent, inspiringrate of growth of economy, helping suppliers along with incubators for large sizedcorporations. This alsodeliverschances to counter poverty and affect monetaryexpansion.Again, over period ofpast few years, worldwidecontest, dynamicmarketplace, and a challenging cost book-keepingsystem have exertedstress on particularly small and medium sized firms. There are small businesses that lack admittance to technology, knowledge about contemporary techniques of accounting, and monetary assistance, and are from time to time impeded by regional rules as well as set of laws (Kuo & Yang, 2014). At the same time, as argued by Pazarceviren and Celayir (2014), monetary unsteadiness and rivalry over the previousfew years have in point of factprovided a path for alteration—improvedarrangement and bettersuppleness—that in turn can eventuallyhelpsmall businesses.

The primary purpose of accounting of cost in particularly administration is to deliver requisite data for executives. In essence, executives can make use ofeffective data on cost to arrive at decisions that can finally enhance financial performance of corporations. Starting fromcommencement of industrial revolution until the period of 2^nd half of twentieth century, majority of producers generated huge amount of few number of products with majority of the costs originating from direct costs namely, materials as well as labour. Fundamentally, traditional system of cost accounting concentrated on particularly direct materials as well as labour in essentially product cost and simply approximated costs of overhead, disregarding enhancing function of different overheads (Ríos-Manríquez et al., 2014). As industrial potential is transformed over the period ofpastseventy five years, producers couldproduce different categories of products, in different quantities, each and every unit manufacturing varied overhead amounts. Usage of sophisticated machinery for the purpose of manufacturing customizable products to place an order can add overheads. However, knowledge regarding information plus communication technology (ICT) have made it feasible to amass and channelize correct information regarding the actions that go into manufacturing a specific manufactured goods. Ahmad (2017) suggests that activity costing as well as input output system of accounting instituted the thoughts of activity based system of costing and allocate costs to each product founded on costs of actions necessary to manufacture the same.

As suggested by Yang and Chang (2018), activity based costing (ABC) helps firms in more effective system of costing of firms’ products. Whilst traditional systems of costing depend on simple dimension for proper allocation of firms’ overheads, ABC can depend on different cost pools plus cost drivers for assignment of cost as per overhead utilization. The most important element of activity based system of accounting can be considered to be cost driver utilized. Essentially, cost drivers can be said to be the most important factors that can ascertain total quantity of activities that can be considered by a definite produce. Instances of drivers of cost take account of total hours of machine, overall amount, intricacy, different types as well as other attributes of product that can ascertain costs. Ngubane et al., (2015) indicate the fact that this mechanism is used in the course of allotmentof overhead expends in essentially managerial system of accounting. Even though associates of research disagree on precise footsteps followed in activity based costing, it fundamentally requires the below mentioned processes:

Examination of effectiveness of activity cost accounting (ABC) for SMEs

– Determination of different actions that are involved in manufacturing each and every product and different cost drivers for enumerating the same

– Ascertainment of costs linked to each and every action

-Ascertainment of proportion of time different workforces spend on actions for each and every product- by means of conduction of interviews otherwise logs

-Enumeration of rates of activity cost drivers (Potkany et al., 2016)

-Assignment of costs to different products otherwise clientele by separating activity costs by means of production of each and every action

The most importantbasis of using cost accounting method in the quarter of administration is necessarily to deliver requisite data for company managers. Management of business enterprises can associate to products to advertisements. Again other decisions thrive to augment operations, lower overall level of costs and permit competitive pricing (Kustiningsih et al., 2017). As all these types of decisions depend to a great extent on data of book-keepingof cost then having correct data is indispensable for a business in recognizing basis of firms’ revenue and optimizing prospective profitability. Since lines of product have necessarily developed to be intricate and specific markets have become moderately more segmented, enterprises have designedmany products for different small sized place of market. In addition to this, sales and enumerated profits for these markets can be considered to be lesser than formerlycollective products. Furthermore, this adjustment in overall competitive and reasonable business setting has made compulsion for more fitting costing information.

As indicated by Sunarni (2015), activity-based costing can help in better allocation of overhead expendsas it does not cluster costs that are distributed across severalactions. Reviewersof conventionalaccounting system for cost disagree that overhead expends are essentiallyallottederroneously. This directs towardsdecreased decisions regarding decisions with regard to product continuance and pricing. There are circumstances where a reasonableproposition or else cost-plus system of pricing is essential. Also, specific cost of corporation’sproduct is critical for product/service pricing. Again,decisions founded on erroneous cost data can put forth an influenceoverall profitability of the corporations in these situations. As stated by Bruwer et al., (2017), indirect cost is anenormousproportion of costs of firms’ products on the whole. Essentially, activity based system of accounting is said to be superior to conventional system that is traditional cost accounting in delivering data for appropriate decisions of pricing (Kalkhouran et al., 2017). In last decades, direct labour stood at 25% to around 30% of the entire cost of firms’ products, however, ever since the period of 1960s, the same is said to have drastically dropped (Potkany et al., 2016). In this regard, it can be said that dominant costs of firms’ products is necessarily indirect costs.

Benefits of using activity-based costing in SMEs

Parker (2016) points out towards the fact that traditional systems of costing have the tendency to utilize a specific rate that can be multiplied by a particular factor. This can help in ascertainment ofoperating cost allocation for a definite product/service otherwise program/project. Particularly, this can also show the way toinaccurate means of costing, particularly when incurring overhead cost is not proportional to that particular facet. In essence, in a specific circumstance under which a workforce institutes aninstrument and runs the same while undertaking other works, utilizing direct labour as a factor for overhead allocation of firms can direct the way towards inaccurate system of costing. In essence, the machine hours are rigorously overhead intensive when considered characteristically. These can be essentially left untreated and ignored, whereas other actions can be charged greater overheads whilst employing fewer amounts of resources aside from direct labour (Rizwan et al., 2018). Utilizing an individual rate for allocation of overhead founded on a single factor can head to misallocation of overhead. This is so because different operations within a particularly shop might vary extensively (Siguenza-Guzman et al., 2016).

Parker (2016) out forward the fact that traditional systems of costs are to great extent criticised for excess-costing simplefirm products that are created in large sized batches together with products that depend on higher utilization of allotment base. In essence, standard system of costing also has the tendency to reflect cost of tailored products to be lower than they are in actual fact. Furthermore, inaccurate system of costing can generate losses as complicated work has the inclination to be underpriced. In essence, the system of costing might perhaps not account for particular features otherwise special know-how. These complicated projects/programs are essentially under-proposed and the company can succeedin specific bids for unbeneficialfunctions. It is at this similarperiod, the same projects can become over-rated and consequently, taking away of beneficial projects can be wanted and simultaneously won by the enterprise. In itself, this particular phenomenon can be hidden by inaccurate otherwise inadequate systems of costing, directing towards erosion of margins of firms’ profits and damage to overall financial feasibility (Phan et al., 2014). At the time when complexprojects are fittingly priced, there are few orders placed for the same and more number of orders for can be generated for standard products.  Special products call for greater support from office executives. Also minute decrease in overall fraction of unique orders againstportion of standard orders have a considerable influence on resources of staff essential for similar level and degree of order actions. Yet another issue encountering firms is the way to cope withidyllic potential in costing of firms’ product. Traditional mechanism of conducting costing have the tendency to distribute costs of idle resources across different products manufactured, suppressing true cost of products and falsely inflating costs of product (Krumwiede & Charles, 2014).

Limitations of activity-based costing in SMEs

Charaf and Rahmouni (2014) assert that system of activity costing mechanism can separate costs of the idle potential from the real costs of firm’s manufactured products. Incorporating surplus potential in costs of products augments perceived product costs without adding specific value to the same. As such, this enhancement in costs can exert impact on managers of firms to want to pull product prices to augment level of profitability. Essentially, this enhancement in prices in the nonexistenceof product development can lessen total number of sales. This in turn can lead to enhancement in idle faculty. Since this idle faculty is re-billed, then there can be upward pressure on firms’ pricing on a continuous basis and can thereby drive down sales. In particular, this death twirl can necessarily be averted by means of eliminating idle wealth/resource costs from costs of manufactured product (Kuo & Yang, 2014). At the time when not including costs of idle potential from costs of products in internal arrangement of cost accounting, then overall project cost remains the same, nevertheless, the product is more accurately reflected. Apart from reflecting product costs, a specific system of accounting can underline or else conceal probable procedures and product enhancements. This traditional system of accounting does not deliver a groundwork based on which management can develop. Costing mechanisms that simply replicate cost do not stand for excess costs incurred by enterprises (Kazemi & Zadeh, 2015).

Eventually, operations are gradually more outsourced, and firms’ margins become leanwhilst production facilities of firms become idle, therefore allocating highercosts of overhead to the left over manufactured products. Continued existence can be considered to be extremely difficult for a corporation (Pazarceviren & Celayir, 2014). Activity-based costing operates in  the same manneradministration thinks so that enhancements can be completedwith the costing data formed.

Activity based costing-ABC was considered to smooth the progress ofpresentingprecise information on the subject of production procedures, costs, and activities for product support. This can help managers in becoming equipped in a better way and to presentenhancements that eventuallyenhance the profitability of firms. Decisions as regards design of product, mix of products, marketing strategies, together with product price can beevaluatedin the course ofcorrectdata on product costing. Hada et al., (2014) suggest that this activity-based costing (also simply referred to as ABC) intends todeliveradministration a means to drive repeatedenhancement and finallyaugment profitability of enterprises. Furthermore, ABC can assist in the process of identification of significant cost-and-profit improvement opportunities in the course of pricing of unprofitable associations of customers, procedures of enhancements on shop floor, low-cost designs of product, and streamlined product range (Hudakova & Bajus, 2015). Again, with no overhead, firms’ product costing can essentially becomeuncomplicated. Particularly, direct labouralong with direct materials can be tracked to products. Essentially, overhead can be considered to betricky to allocateaccurately and this can be considered to be aconsiderablesegment of product cost. In essence, systems of cost accounting (referring to variable/ conventional or else activity based system of accounting) need not be viewed as good/bad. There is a necessity to selectbased on correctnessand suitability for the corporation and data requirement.

Traditional systems of costing can be considered to be the most suitable system when an enterprise or else a shop essentially present a distinctive product (Hudakova & Bajus, 2015). By and large, by means of a combination of standard costing and activity based costing can help most companies. There are certain corporations thatmake use of standard systems of costing to apportion direct labour as well as materials. Essentially, activity-based costing is also used to apportionand deal out with overhead. There are also other firms thatmake use of a standard system of cost for the purpose of financial accounting together with activity-based costing for undertaking internal accounting. Assimilating the entire systems can permitfirms to preserveand maintain the benefits of both the techniques—better-quality control for the purpose of standard costing and advancedallocation of overhead for activity-based system of costing (Hudakova & Bajus, 2015). Particularly, there are a number ofcurrent studies that replicaterequest for information for transformed interest in activity based costing and elucidatesprospective and benefits of execution of activity based costing in small and medium sized enterprises.

There are varied arguments both in favour and against and analysis can be presented as per case studies. All together, enhancing awareness regarding the significance of SMEs, as declared previously reflect over and above 90% of employment across the entire world. This has delivered impulsion for supplementary analysis of prospect of the company activity based costing to aid SMEs, help in becoming relatively more competitive and keep going in stiffly competitive environment.

The research relevantly utilises both the primary and secondary data for the research purposes, where the output data aligns with the research topic. The research methodology highlights different approaches and philosophy, which has been used for identifying the relevant output of the research topic. In addition, the section has also highlighted therelevantinformationregarding primary data, which is evaluated with the help of statistical tools for deriving the overall output for the research topic. The statistical calculation has been used for evaluating the primary data collected for detecting the output for the research. The statistical calculations such as descriptive analysis, is used for evaluating the collected data and derive the research output. The central tendency conditions have been used in the calculating the relevant measure for identifying the optimal research output. Lastly, the ethical considerations and limitations of the research is also depicted for identifying the constraints that has affected the research data.

The aims of the study are to derive the significance of using activity based costing and traditional costing method by SMEs. The requirements of the research compel the study to gather mixed data, as it uses both the qualitative and quantitate analysis for conducting the research. In addition, the research onion indicates the overall steps, methods and approaches, which would eventually allow the researcher to obtain the required level of output for supporting the research objective (Mackey & Gass, 2015). In the concept of research onion, the study will be utilising both surveys and secondarily data from the journals to gather the required data for obtaining the results. This would relevantly result in the research methodology of mixed method simple. The research has been using the methodology of mixed method simple for analysing the overall data that has been collected for the research. Furthermore, the mixed method simple relevantly analyses both qualitative and quantitative data for identifying the optimal research outcome. The research onion is considered to be a pathway, which has been used by the researchers to detect the level of method and conditions that needs to be conducted for competing the research and meeting the research objective. The relevant path of the research also indicates the use of deducting approach for evaluating the gathered data, as it helps in detecting the accurate output for the research. The research also uses positivism method, as the overall research philosophy, which can help in providing valid objectivity to a research (Panneerselvam, 2014). Hence, with the presence research onion relevantly simplifies of the overall process and detects the pathway which can be used for completing the overall research and derive adequate outputs. Therefore, the research onion has adequately guided the whole research to obtain the relevant data for supporting the research objectives and deriving the results.

The research philosophy relevantly has four different section, which are used by different researchers in their study to derive the overall output for the research. Furthermore, the overall philosophy relevantly comprises of positivism, realism, Interpretivism and pragmatism, which can be used for conducting the adequate research and deriving the output for the research. The use of positivism relevantly allows the researcher in evaluating the data in diverse positive factors, which could generally help in detecting the accurate evidence for the research (Taylor et al., 2015). The overall use of positivism approach would also help in understanding the workings of the Traditional and Activity based approaches in the SMEs. The positivism theory directly uses the specific positive knowledge where it utilises the natural events for identifying the overall data used in the research. Therefore, it could be understood that with the implementation of positivism theory the research is able to derive valid output from the analysis.

The other researchers relevantlyuse different research philosophies in accordance with the research requirement, where the use of realism, Interpretivism and pragmatism are conducted for deriving the accurate output for the data. The research relevantly uses quantitative and qualitative analysis for analysing the overall data collected for the research. In this context, the research has been using post positivism method for analysing the overall data collected for the research. The research has been using the qualitative and quantitative data, which relevantly evaluates both the collected data (Lewis, 2015). The use of post positivism method has portrayed the adequate output data for the research, which allowed in evaluating the interviews and research data selected from academic journals. The research philosophy has been an adequate guide, which results both the collected data for surveys and the academic journals.

The researchapproach is conducted to be a path way which allows researcher for adequate analysing the collected data and derive appropriate result or output for the study. There are two different kinds of research approach such as inductive and deductive, which are used by researchers in identifying the output. The researcher with the inductive measure is able to reason different level of observation and develop illustrative theories, which can be used for identifying different level of illustrative theories that can be used for identifying the pattern in entire series of hypothesis. The use of inductive approach allows the researcher for developing the accurate level of specific direction that can be followed in completing the study (Glesne, 2015).

However, the deductive approach method is relevantly used by the researchers for utilising subsisting theory and research strategy for examining different level of research for completing the study. In addition, with the use of deductive approach the researcher is mainly able to derive specific conclusion from the general rule and detecting the accurate output for the research. The researcher directly utilises the defined model and approach for deriving the overall output of the research, which is considered to be true in comparison to the inductive approach (Pearson et al., 2015). Furthermore, the deductive approach utilises different hypothesis for conducting relevant output of the research. The current research relevantly portrays the effectiveness, usefulness and limitation of the traditional and activity-based costing method in SMEs. Therefore, with the use of defined theories and models the research is able to the evaluate the gathered data, while identifying the accurate output supporting the objective of the study (Flick, 2015).Hence, deductive approach has been used in the study for adequately identifying the relevant output supporting the research objective.

The research relevantly needs both interviews and secondary data for deriving the accurate output, which support the overall research outcome. The research relevantly indicates the use of different surveys from the SMEs, as it helps in deriving the overall data for supporting the research objective. In addition, the data has been collected from different journals, which relevantly helps in detecting the significance of traditional and activity-based costing methods. This would eventually help in understanding the accurate data for detecting the adequate output for research. The research has relevantly used both the secondary and primary data in deriving the adequate output for the research and analyses the method for identifying the linking between the limitations and benefits of using traditional and activity-based costing method (Vaioleti, 2016).

The study has also used adequate philosophy of post positivism method, which has relevantly allowed the research for analysing both the qualitative and qualitative method. The researcher has relevantly used different level of approach, which has helped in analysing the collected data. The use of deductive approach is essential for the research, as the topic relevantly utilises different level of defined models and theories for deriving the accurate output of the research. The research has mainly used secondary and primary method is analysing the overall data collected from surveys and journals.Silverman (2016) mentioned that researchers with the use of adequate measure are able to detect the accurate methods, which can be used in deriving the research output. The statistical calculations have been used for detecting the research outcome, which supports the research objectives.

Data has been collected from different surveys, which has allowed them to detect the different level of data for identifying the accurate results (Quinlan et al., 2018). The data collected from the surveys could eventually help in identifying the accurate level of data for the study. The data will also be collected from the relevant surveys conducted within the SMEs to identify the relevant significance and limitation of the costing measures. The adequate level of business operations has been selected where the 10 SMEs are used for gathering the overall data for the research. This selection process of the SMEs has relevantly helped in collecting the overall data, which can be used for deriving the accurate output for the research. Litosseliti (2018) mentioned that with the use of surveys researchers are able to gather the data and responses, which are statistically evaluated to deriving the output supporting the objectives of the study.

The research has been conducted with the help of surveys from SMEs and journals addressing activity based costing and traditional costing. The data has been collected from the adequate journals, which is relevantly evaluated to derive the overall results, which is needed for supporting the research objectives (Smith, 2015). In addition, the journal linking to activity based costing and traditional costing is relevantly utilised in the current research for detecting the significance and limitation of the current measure used by the SMEs. Furthermore, the journals are collected from authentic source, which does not compromise the overall integrity of the research and poses threat to the outcome. The journals of renounced authors and researchers are used, which directly highlights the relevant information about the traditional and activity-based costing method. Lewis (2015) stated that with the use of secondary data collection process the research is able to understand the previous research limitation and derive the path in which the research could obtain fruitful results.

Furthermore, the research uses both secondary and primary data collection process, where with the help of adequate survey of the SMEs, the primary data is collected for the research, where adequate statistical data is used for deriving the research output. The data of 10 SMEs has been used for gathering the relevant data for the research, which can highlight the significance and limitation of the costing measure in real world application.

The data has been collected for both secondary and primary data, which can be analysed with the help of qualitative and quantitative method. The qualitative method has been used for analysing the data collected from the journals, while the primary data collected from surveys will be evaluated with the help of statistical tools (Silverman, 2016). The use of descriptive statistic and inferential statistics has been used for calculating the overall primary data (Ledford & Gast, 2018). The central tendency has been calculated with the help of excel software. Furthermore, the data is collected from the overall surveys need to be analysed with the help of adequate statistical calculation and method, which drives the output used for supporting the research objective. The calculation of Annova, regression and correlation is relevantly used for evaluating the overall collected data to derive the results used for supporting the research objective. The use of excel calculation such as descriptive analysis is used for evaluating overall data collected from the survey to understand the significance of the costing measures used by the SMEs. Ledford and Gast (2018) stated statistical calculation is relevantly helpful in deriving the trend and analysing high end data. The description analysis highlights the significance and limitation of activitycosting and traditional costing measure used by companies. This might eventually help insupporting the researchobjective and determine the optimal costing method that can be used by the SMEs.The statistical method has always been used for evaluating the primary data collected for the overall research.

Reliability of sources utilized for the study

Relying on different state of affairs, gathering of data for reliability evaluates can either be an uncomplicated matter or else main areas of headache. Even though there is not an official data system of collection in position, odds are that much of the necessary general information is being amassedso as to track costs of warranty and financial information. Particularly, the prospective drawback is that system of collection of data might perhaps not be instituted to amassdifferent categories of data essential to execute a detailed reliability evaluation. As stated by Pérez-Méndez and Machado-Cabezas (2015), there are numerous methodologies for collection of data thatconcentrate on facets of performance of field other than dependability. By and large, it can be considered to be small matter to transform data collection procedures to amassessential reliability information.

Ethical Codes: Informed approval

Informed consent can be considered to be an important ethical concern in undertaking research study. This refers to the fact that a specific individual knowingly, willingly, intelligently and in a clear way provides consent. Informed consent can be considered to be one of the ways by which respondents’ rights to autonomy can be protected. Informed consent intends to fit in rights of self-governing individuals by means of self- determination. Also, thisalso intends to avert assaults on reliability of individuals and defend personal liberty and reality. Of course, individuals can present informed decisions to partake in research willinglyonly when they have information regarding probable risks as well as advantages of research study.

The researchers have the need to consider individuals with physical, cultural as well as emotional barriers that might call for extremely simple language for proper comprehension. In conclusion, autonomy to withdraw needs to be illustrated. Essentially, this can be considered to be extremely important. However, this raises overall issue of withdrawing subjects after development of a personal along with friendlyassociation with the investigator. 

Beneficence can be considered to be difficult to forecast at the time ofgenerating a hypothesis particularly in qualitative research. Weber (2017) says that in case if research findings establish that it was not advantageous as it was anticipated. This can raise massive ethical reflection especially for respondents. Nakata (2015) asserted that beneficence can be referred to advantagesassociated to research, whilst non-malificence links to prospective risks of involvement. Simmons and Watson (2015) mentioned that Nonmalificence calls for higher degree of sensitivity from researcher as regardsthe notions that constitute “harm”. As per Brannen (2017), “discomfort together with harm can be considered to be physiological, expressive, social along with economic in feature”. 

The researcher encounters the issue of confidentiality along with anonymity. This is said to be closely connected to the rights and authority of beneficence. Anonymity has the need to be protected at the time when the identity of the subject cannot be associated with personal reactions. In case if the researchers can promise anonymity then the issue of confidentiality can also be addressed. In essence, this can be considered to be the most important way of management of private information by the learner form protection of identity of the subject. Vaioleti (2016) advocates the fact that confidentiality refers to the fact that individuals have the freedom to deliver and at the same time withhold certain information. Also, the researcher is also accountable to maintain certain degree of confidentiality that necessarily goes beyond loyalty. Taylor et al., (2015) address ethical dilemma of the learner when confidentiality is considered and need to broken keeping in mind moral responsibility of firms.

Privacy can be considered to be freedom that a specific individual has for ascertainment of time, degree, extent along with normal circumstances under which private information can be shared or else withheld from others. Simmons and Watson (2015) asserts that invasion of privacy takes place when private information namely beliefs, viewpoints, attitudes and behaviors as well as records can be shared with different others. Pearson et al., (2015) suggest that whenever different subjects decline to report personal information since they consider the same to be invasion of privacy. In this case as well, the researcher has the need to show respect to different opinions and outlooks of respondents.

These days, there is said to be an enhanced concern regarding vulnerable groups and it is important to consider whether it is ethical to employthese vulnerable groups. Different viewpoints as regards participations in research can indicate towards incapability to provide an informed consent.

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