Extent of Activity-Based Costing (ABC) Implementation in Libyan Industrial Companies and Its Impact on Pricing Decisions: A Field Study

Abstract

This study examines the extent of Activity-Based Costing (ABC) implementation in Libyan industrial companies and tests how ABC maturity affects pricing decision effectiveness. The topic is motivated by rising indirect cost intensity and product variety, which make traditional overhead allocation prone to unit-cost distortion. A descriptive–analytical, cross-sectional design was employed during May–June 2025 using a five-point Likert survey administered to managers in cost accounting, production/operations, marketing/pricing, and quality, complemented by “hard” operational indicators from company records: time-to-price (T_price) and gross-margin volatility (GM_volatility). ABC maturity is operationalized as a latent construct with five dimensions: activity/pool definition, cost-driver suitability, data quality and indirect-cost tracing, integration of ABC reports into pricing, and TDABC readiness/use. Pricing effectiveness is measured via cost-estimation accuracy, decision speed, margin stability, price–strategy/value fit, and product/customer profitability. The analysis includes descriptive statistics, reliability and validity tests (Cronbach’s α, KMO), exploratory/confirmatory factor analysis, and multiple regression with controls (firm size, age, automation, IS maturity, product complexity, competition). The practical chapter provides an applied design at LISCO—covering activity centers, cost drivers, reporting templates, ABC/TDABC costing, price fences, and an RFQ calculator. The study expects a positive, statistically significant association between ABC maturity and pricing effectiveness, mediated by the integration of ABC reports into pricing governance. It contributes theoretically by modeling the ABC–pricing pathway, and practically by enabling more accurate pricing and reducing cross-subsidization among products and customers.