Management Accounting (1984 1994) – Development Of New Practice & Theory

605 words - 3 pages

MANAGEMENT ACCOUNTING (1984-1994)
– Development of New Practice & Theory

Introduction
Decade during 1984 – 1994, management accounting has a revolution in theory and practices that identified failings and obsolescence of existing cost and performance measurement systems
Three major change in new theory & practices that influence management accounting practices:
Activity Based Costing Management
Operational Control Systems
Performance Measurement: The Balanced Scorecard
Activity Based Cost (ABC) Management
Traditional cost allocation system that is identical to overhead allocation and direct costing were acknowledged to be obsolete.
New cost system shifts the paradigm of how to ...view middle of the document...

The more batch level activities demanded, the more the organization must spend to supply resources.
Product/customer/facility/channel-sustaining activities: cost that incur inline with the activities that are performed to enable production, sales & distribution and marketing of individual products and services.
include maintaining & updating product spec, special testing & tooling, developing and advertising for individual products/services.
Activity Based Cost (ABC) Management
Cont’d. Notes:
ABC system enabled all organizational expenses to be mapped to a particular hierarchical or organizational level where cause and effect could be established.
Compared to the traditional cost system, ABC provided a much richer set of drivers of cost variability for cost that incurred independent of the volume and mix of products/services and therefore enhance cost control over entire organization.

Measuring the Cost of Resource Usage:
Activity-based systems measure the costs of using resources, not the cost of supplying resources by using the following Cost of Resources Supplied = Cost of Resources Used + Cost of...

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