31 Dec A CASE STUDY: DUBAIIn light of conflicting views i
A CASE STUDY: DUBAIIn light of conflicting views in the academic research,we examine how standard costing and variance analysisare used in one of the world’s fastest-growingeconomies: Dubai, one of the seven emirates, or states,in the United Arab Emirates. A number of events makeour case study appealing, including the steps the Dubaigovernment has taken to free up prices and wages,rationalize indirect taxes, deregulate the financial system, promote foreign direct investment, and encourageall companies to use new information and communication technology. To our knowledge, this study is thefirst of its kind to shed light on the level of use of standard costing tools in Dubai.Our study differs from the earlier study by Sulaiman,et al., in that, while they split their sample on the basisof ownership (Japanese vs. local), we disaggregated thecompanies by sectors: industrial vs. service. We did thisfor two reasons. The first is contextual: By law, foreigners in Dubai cannot own 50% or more of a companyunless that company is located in the free zones.8 Thusit is just not possible to differentiate between nonlocaland local companies in Dubai. Second, by studying theservice sector separately, we capture its importance interms of its contribution to Dubai’s gross domesticproduct (GDP). The reason also relates to the fact thatthe service sector has been studied less than the industrial sector when it comes to the use of standard costing.A plausible explanation for this might be the perceptionthat standard costing is not appropriate for the servicesector and the claim that service companies distancethemselves from it. Therefore, we address the followingquestions:a. Is standard costing used in Dubai?b. How important are various functions in standardcosting?c. How frequently are various techniques and coststandards used in standard costing?d. How important is the analysis of variance for control purposes?COLLECTING THE DATAWe collected the data presented here through a surveyquestionnaire, and we had a reasonably good responserate. We chose the companies randomly, covering allsubcomponents of the industrial sector and the serviceand trading (retail) sector, which together constitute theprivate sector in Dubai.9To design our questionnaire, we modified those ofColin Drury, Chris Guilding, and Sulaiman to allow usto compare our study findings with those that looked atU.K. and Malaysian companies.10 We created the questionnaire, which consists of demographics, characteristics of cost accounting tools, and standard costingpractices in Dubai, to answer the following questions:1. Do accounting and finance professionals in Dubaiuse standard costing or some other method to makemanagement decisions?2. Which techniques are used in standard costing inrelation to standards based on design/engineeringstudies, observations based on trial runs, work/studytechniques, or average historic usage?3. How are various types of costing standards practicedby Dubai companies with respect to maximum efficiency standards that are achievable but difficult to
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