What We Know (and Don’t Know) about ABC Implementation
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In the business literature, emphasis on business activities and processes can be traced to Michael Porter’s (1980) “value chain” framework for analyzing sources of firms’ competitive advantage. During the same time period, Porter’s colleagues at Harvard Business School, Robin Cooper and Robert Kaplan, discovered firms that had modified traditional cost accounting systems to better represent the flow of resources to the products and services that consumed them. Traditional costing systems are typically designed to allocate overhead costs from the general ledger to an entity with reporting responsibility (e.g., profit centers, cost centers, or investment centers) and from that entity to the products or services that it produces. The latter allocation of overhead costs to products is typically accomplished by prorating overhead costs on the basis of direct labor hours, material costs, or another measure of unit variable costs.
KeywordsManagement Innovation Material Handling Defensive Behavior Total Quality Management Cost Driver
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