Joseph TheuriArithi, Vandrose2023-08-102023-08-102023http://ir-library.ku.ac.ke/handle/123456789/26770A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of Degree of Master of Business Administration (Finance Option) of Kenyatta UniversityActivity-based costing is vital in cost information analysis for financial decision making hence has a link to the net returns of a firm. However, Kenya’s manufacturing companies are experiencing undesirable financial performance as demonstrated by inadequate profits and slow growth in overall net returns. It is against this challenge that the researcher examined the effect of activity-based costing on financial performance of manufacturing companies listed on the Nairobi Securities Exchange. The specific objectives of the study included; to determine the effect of resource management, cost activities determination, cost driver selection and cost objects on financial performance of listed manufacturing companies. The study was anchored on theories comprising positive accounting theory, theory of constraints, and profit maximization theory. Survey research design was employed. The study’s target population comprised all the eight manufacturing companies listed on the Nairobi Securities Exchange while the unit of analysis was the managers. Census technique was employed and structured questionnaire was used in collection of data. Data analysis was done through descriptive and inferential statistical methods via aid of Statistical Packages for Social Sciences (SPSS) version 24. Descriptive findings established that activity based costing parameters; resource management, cost activities determination, cost driver selection and cost objects determination affected the financial performance of listed on the Nairobi Securities Exchange. Correlation analysis results revealed that all the variables had a significant relationship with financial performance. Therefore, activity-based costing affected financial performance. Regression analysis results indicated that the coefficient of determination was 0.723 thus activity-based costing accounted for 72.3% variation in financial performance. The study concluded that appropriate management of resources enables manufacturing firms to plan, schedule, forecast and optimize costs and returns. Use of activity-based costing is a great way of managing the resources of manufacturing companies and promoting financial performance. It is also concluded that cost driver selection has a great relevance on the management of costs and enhancement of the Returns on Assets (ROA) for listed manufacturing companies. The study recommends that a comprehensive implementation guidelines and principles for adopting activity-based costing should be developed. Manufacturing companies should intensify the utilization of activity-based costing in the management of resources. It is also recommended that cost driver selection as part of activity-based costing should be integrated into the financial plans of listed manufacturing companies. This integration will lead to cost minimization and optimization of returns.enNairobi Securities ExchangeKenyaThesis