Management Accounting

The last several decades have been a turbulent period for management accounting in the United States. Many U.S. businesses failed in the international market, and the management accounting profession recognized that some of the blame rests upon shortcomings in the information provided to managers. A continuous flow of articles dating back to the mid-1980's such as Kaplan (1986) or Chalos and Bader (1986) has criticized contemporary management accounting systems. On the other hand, Reider and Saunders (1988) offered a defense of contemporary management accounting methods asserting that the methods are adequate but have not been used appropriately.

Management accounting plays a crucial role in manufacturing competitiveness by supplying relevant information which guides and facilitates management planning and control, decision making, and performance evaluation (Amenkhienan. and Green, 1990). Until recently, management accounting has been heavily criticized for failing to provide timely and accurate information, and for not keeping pace with the new manufacturing environment and technologies (Johnson and Kaplan, 1988). Other criticisms suggest that management accounting reports are of little help to operating managers and that the system fails to provide accurate product costs.

In response, firms have adopted new costing techniques including the most common, Activity-Based-Costing (ABC). Yet even advocates of ABC have criticized its use (Johnson, 1992). The response to the criticism is that individuals do not understand this accounting method and, therefore, misuse its techniques (Kaplan, 1992). This is similar to the defense of the traditional accounting techniques. Both claim that the techniques are appropriate, but incorrectly used. Maybe all of these authors are correct. Management accounting information does have problems, but where do the problems lie?

In academia, new models have found their way into journals and texts. Caution is necessary however, as it is too easy to criticize the traditional models and move quickly away from them rather than reconcile new ideas with old models. Manufacturing firms are adopting Just-In-Time (JIT) systems, and Total Quality Management (TQM) has become the preferred system. These three currently popular business concepts (ABC, JIT, and TQM) will be discussed.

ACTIVITY-BASED COSTING (ABC)

Among the criticisms ...

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...., 1992, pp. 26‑35.

Johnson, H. T., and R. S. Kaplan, "The Rise and Fall of Management Accounting," Management Accounting, January 1988, pp. 5-12.

Jones, Daniel J., "JIT and the EOQ Model," Management Accounting, February 1991, pp. 54-57.

Kaplan, R. S., "Accounting Lag: The Obsolescence of Cost Accounting Systems," California Management Review, Winter 1986, pp. 174‑199

Kaplan, R. S., "In Defense of Activity-Based Cost Management," Management Accounting, Nov., 1992, pp. 58‑63.

Kaplan, R. S. and A. A. Atkinson, Advanced Management Accounting, Second Ed. (Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1989), p. 373.

Reider, B. and G. Saunders, "Management Accounting Education: A Defense of Criticisms," Accounting Horizons, Dec., 1988, pp. 58‑62.

Troxel, Richard B., and Milan G. Weber, Jr., "The Evolution of Activity-Based Costing," Journal of Cost Management for the Manufacturing Industry, Spring 1990, pp. 14-22.

Weisman, Denis L., "How Cost Allocation System can Lead Managers Astray," Journal of Cost Management for the Manufacturing, Spring 1991, pp. 4-10