Current value accounting
Activity-based Costing (ABC) and Activitybased Management (ABM)
Implementation – Is This the Solution for
Organizations to Gain Profitability?
Authors*:
Ildikó Réka CARDOŞ,
Ştefan PETE
A
bstract. Adherents of ABC/ABM systems claimed traditional management accounting systems generated misleading costs in a contemporary, tumultuous, often changing business environment and implementing
ABC/ABM would remedy this. That is why activity-based costing (ABC) and activity-based management (ABM) represents the symbol of improved competitiveness and efficiency in every organization.
The purpose of this article – after analyzing the existing literature in the field – is to emphasize that new cost systems such as ABC and ABM could be a strong couple that assures competitiveness and efficiency for each company. Another objective is to present that, besides its disadvantages, firms implement the
ABC/ABM system because it permits better tracing of costs to objects, superior allocation of overheads to cost objects, financial and non-financial analysis and measures useful to managers and management accountants in the decisionmaking process.
Keywords: ABC, ABM, implementation process, profitability
JEL Classification: M41, M10, M49
* Asist.univ.dr.Ildikó Réka Cardoş, Babeş-Bolyai University, Faculty of Economics and
Business Administration, Cluj-Napoca, e-mail: v_reka@yahoo.com; Conf.univ.dr.Ştefan
Pete, Babeş-Bolyai University, Faculty of Economics and Business Administration, ClujNapoca, e-mail: peteistvan_nv@yahoo.com.
152
Ildikó Réka CARDOŞ, Ştefan PETE
Introduction
Changes in the business environment, triggered by global competition and technological innovation, have led to innovations in the use of financial and nonfinancial information in organizations. The new environment demands relevant information and data about costs and performance within the organization’s activities, processes, products, services and customers.
Usually,
Implementation – Is This the Solution for
Organizations to Gain Profitability?
Authors*:
Ildikó Réka CARDOŞ,
Ştefan PETE
A
bstract. Adherents of ABC/ABM systems claimed traditional management accounting systems generated misleading costs in a contemporary, tumultuous, often changing business environment and implementing
ABC/ABM would remedy this. That is why activity-based costing (ABC) and activity-based management (ABM) represents the symbol of improved competitiveness and efficiency in every organization.
The purpose of this article – after analyzing the existing literature in the field – is to emphasize that new cost systems such as ABC and ABM could be a strong couple that assures competitiveness and efficiency for each company. Another objective is to present that, besides its disadvantages, firms implement the
ABC/ABM system because it permits better tracing of costs to objects, superior allocation of overheads to cost objects, financial and non-financial analysis and measures useful to managers and management accountants in the decisionmaking process.
Keywords: ABC, ABM, implementation process, profitability
JEL Classification: M41, M10, M49
* Asist.univ.dr.Ildikó Réka Cardoş, Babeş-Bolyai University, Faculty of Economics and
Business Administration, Cluj-Napoca, e-mail: v_reka@yahoo.com; Conf.univ.dr.Ştefan
Pete, Babeş-Bolyai University, Faculty of Economics and Business Administration, ClujNapoca, e-mail: peteistvan_nv@yahoo.com.
152
Ildikó Réka CARDOŞ, Ştefan PETE
Introduction
Changes in the business environment, triggered by global competition and technological innovation, have led to innovations in the use of financial and nonfinancial information in organizations. The new environment demands relevant information and data about costs and performance within the organization’s activities, processes, products, services and customers.
Usually,
References: 1. Askarany, D.; Yazdifar, H. (2007), “Why ABC is not widely implemented?”, International Journal of Business Research, Vol 2. Askarany, D.; Smith, M.; Yazdifar, H. (2007), “Technological innovations, activity based costing and satisfaction”, Journal of Accounting-Business&Management, No 3. Baird, K. (2007) “Adoption of activity management practices in public sector organizations”, Accounting and Finance, No 4. Bescos, P.L.; Cauvin, E.; Gosselin, M. (2002), “Activity based costing and activity based management: a comparison of the practices in Canada and in France”, Comptabilite-ControlAudit, Special Issue – May, pp 5. Bjornenak, T.; Falconer, M. (2002), “The development of activity-based costing journal literature, 1987-2000”, The European Accounting Review, Vol 6. Cardos, I.R. (2010) Contabilitate managerială şi calculaţia costurilor. Trecut, prezent şi viitor, Editura Alma Mater, Cluj-Napoca. 7. Clark, P.; Hill, N.T.; Stevens, K. (2002), “Activity based costing in Ireland: Barriers and opportunities for change”, Critical Perspectives on Accounting, No 8. Cohen, S.; Venieris, G.; Kaimenaki, E. (2005), “ABC: adopters, supporters, deniers and unawares”, Managerial Auditing Journal, Vol 9. Friedl, G.; Hammer, C.; Pedell, B.; Kupper H.U. (2009), “How do German companies run their cost accounting systems?”, Management Accounting Quarterly, Vol 10. Groot, T. (1999) “Activity based costing in US and Dutch Food Companies”, Advances in Management Accounting, No 11. Hopper, T. (1994), “Activity based costing: A critical commentary”, Fukuoka University Review of Commercial Sciences, 39 (1/2) pp 12. Hopper, T.; Major, M. (2007), “Extending Institutional Analysis through Theoretical Triangulation: Regulation and Activity-Based Costing in Portuguese Telecommunications”, European Accounting 13. Hughes, A. (2005), “ABC/ABM – Activity-based costing and activity based management. A profitability model for SME’s manufacturing clothing and textiles in the UK”, Journal of Fashion 14. Hughes, S.B.; Gjerde, K.P. (2003), “Do Different Cost Systems Make a Difference?” Management Accounting Quarterly, Vol 15. Innes, J.; Mitchell, F.; Sinclair, D. (2000), “Activity Based Costing in the UK largest companies: A comparison of 1994 and 1999 survey results”, Management Accounting Research, Vol 16. Jarvenpaa, M. (2007), “Making Business Partners: A Case Study on How Management Accounting Culture Was Changed”, European Accounting Review, Vol 17. Jinga, G.; Dumitru, M.; Dumitrana, M.; Vulpoi, M. (2010), “Accounting systems for cost management used in the Romanian economic entities”, Accounting and Management Information 18. Jones, T.; Dugdale, D. (2002), “The ABC bandwagon and the juggernaut of modernity”, Accounting, Organizations and Society, 27 (1/2), pp 19. Kaplan, R.S.; Cooper, R. (1998), Cost & Effect. Using Integrated Cost Systems to Drive Profitability and Performance, Harvard Business School Press. 20. Lukka, K.; Granlund, M. (2002), “The fragmented communication structure within the accounting academia: the case of activity based costing research genres”, Accounting, Organizations and 21. Lukka, K.; Mouritsen, J. (2002), “Homogeneity or heterogeneity of research in management accounting?”, The European Accounting Review, Vol 22. Miller, J.A. (1996), Implementing Activity-Based Management in Daily Operations, John Wiley & Sons Inc. 23. Needy, K.L.; Nachtmann, H.; Roztocki, N.; Warner, R.C.; Bidanda, B. (2003), “Implementing activity-based costing systems in small manufacturing firms: A field study”, Engineering 24. Scapens, W.R. (2006), “Changing times: Management accounting research and practice from a UK perspective”, Contemporary Issues in Management Accounting, pp 25. Siti-Nabiha Abdul-Khalid (2009), “Sensemaking in Interpretive Management Accounting Research: Constructing a Credible Account”, International Journal of Qualitative Methods 8(1). 26. Yazdifar, H.; Tsameny, M. (2005), “Management accounting change and the changing roles of management accountants: A comparative analysis between dependent and independent 27. Zimmerman, J.L. (2001), “Conjectures regarding empirical managerial accounting research”, Journal of Accounting and Economics, 32, pp 29. Institute of Management Accountants, (1998), “Implementing Activity-Based Management: Avoiding the Pitfalls”, Statements on Management Accounting – Statement Number 4CC. 30. The Canadian Institute of Chartered Accountants, (2004), “20 Questions Directors Should Ask About IT” – Revised.