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BWL - Rechnungswesen, Bilanzierung, Steuern


Autor

Nadine Wiese
7 Texte

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Kategorie
Hausarbeit
Institution / Hochschule
Note
1,0

Assignment:
Activity-Based Costing
Advanced Management Accounting
2007/2008
Words: 2,750
- 1 -
List of Contents
1.
Introduction...2
2.
Emergence of ABC...2
3.
Evolvement of ABC...6
4.
Impacts of ABC, ABB, and ABM...9
5.
Conclusion...13
6.
References...14
7.
Appendices...16
- 2 -
1.
Introduction
Activity Based Costing, short ABC, was developed in the 1980s as it became apparent that the
traditional management accounting practices could no longer meet the arising requirements
due to a dramatically changing environment.
Therefore, to detect this way towards ABC, this report will start to look at the book
"Relevance Lost: The Rise and Fall of Management Accounting" of Johnson and Kaplan,
where they introduce ABC as a recommendation to overcome the shortcomings of the
traditional accounting method.
In the subsequent passages of this paper, it is examined how the initial ABC proposed by
Johnson and Kaplan has been criticised and expanded. Several impacts on organisations of
ABC and its later developments into ABM and ABB are then reported. And finally, all
findings will be summarised and it is discussed whether the original criticisms of traditional
management accounting techniques really have been outperformed.
2.
Emergence of ABC
In the book "Relevance Lost", Johnson and Kaplan argue that the increasingly changing
environment especially in the 1980s with worldwide competition, and enormous advances in
technologies (1987, p.3), and more complexity in product lines led to cost systems that "are
helpful neither for product costing nor for operational cost control; they do not provide
information useful for cost management" (J&K 1987, p.195).
There is a predominance of financial cost systems that means: simple, arbitrary allocations of
overheads to cost centres and then to products. This takes place with the help of estimated
direct labour rates. These, due to increasing automations, are up to twenty times higher than
the "actual direct labor rate paid to workers" (J&K 1987, p.184) and encourage cost
reductions not of overheads that actually cause the high product costs, but regarding the
labour costs, though amounting "only 4% of total costs", (J&K 1987, p.188).
- 3 -
Since 1925 almost all management accounting techniques have been introduced, but no
further innovations were undertaken to pay regard to the changing environment (J&K 1987,
p.12).
Resulting problems of current cost systems are distortion of product costs as well as "delayed
and overly aggregated" information (J&K 1987, p.13).
Thus, to avoid these deficits of traditional cost systems, Johnson and Kaplan make
recommendations on how relevant cost information can be attained for process control and
product costs calculations.
Process control
Processes of different organisational departments, or `cost centres' can be controlled through
`flexible budgets' that "compare actual to budgeted [costs] and investigate any significant
variances" (J&K 1987, p.231). To obtain these costs, `cost drivers'
1
that lead to varying costs,
and the periodicity of producing measurable units must be identified because for "operations
turning out multiple parts per second, it is not helpful to have a monthly cost control report"
(J&K 1987, pp.229,230).
Product Costs
Product costs must be computed referring to the time horizon and type of problem that is
expected to solve.
Short-term product costs
are utilised for decisions that emerge in the short-run like: adjusting
the product mix or whether or not accepting orders received, and include all variable costs as
well as opportunity costs (J&K 1987, pp.233,234).
In contrast, long-term product costs take into account all, variable and fixed costs. For
decisions concerning "product pricing, product abandonment [...], and make or buy" (J&K
1987, p.233), all costs become variable and controllable due to the long time horizon.
The calculation of long-term product costs differs enormously from traditional cost systems.
(J&K 1987, p.234)
1
Next to the common direct labour hours, now also non-volume based cost drivers like number of set-ups, or
orders received were included that do not depend on the output produced.
Textauszug: 5 von 19 Seiten -  nach oben


Beschreibung

Titel:
Activity-Based-Costing (ABC)
Veranstaltung:
Advanced Management Accounting
Autor:
Nadine Wiese
Jahr:
2007
Seiten:
19
Archivnummer:
V138213
ISBN (eBook):
978-3-640-46783-9
ISBN (Buch):
978-3-640-46746-4
DOI:
10.3239/9783640467839
Dateigröße:
354 KB
Sprache:
Englisch

Anmerkungen:
Important articles identified, critically evaluated and sythesised. Very good case studies and surveys identified. Good balanced summary of your findings.
Schlagworte:
Prozesskostenrechnung Controlling Rechnungswesen Kostenstellenrechnnung

Arbeit zitieren:

Nadine Wiese, 2007, Activity-Based-Costing (ABC), München, GRIN Verlag GmbH

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