From ancient times, dating from 4500 years before Our Age (ane), accounting documents are reported in ancient Mesopotamia, which had wage cost determinations and some of them indicated the existence of inventories. Already in the Middle Ages the union organization was reached as the socioeconomic base of production, but only with the development of the Industrial Revolution did the improvement of cost systems begin, which is attributed to the technological advance of the time, which led to an increase in production capacity since the principle of specialization of work on a large scale was applied, leading to a notable decrease in the unit cost of products. Although it should be noted that it could not be said that it was already a finished or improved Cost Accounting,since the three elements of cost were not defined (Figure # 1), these are defined below:
- the first element is made up of direct materials (MD), these are those that can be identified in the production of a finished product and that can easily be associated with the product / service; the second, direct labor (MOD) that is the physical or mental effort expended on the transformation of raw materials and materials into the final product; the third element is made up of indirect manufacturing costs (CIF) that are used to accumulate indirect materials, indirect labor, and all other indirect manufacturing costs. These concepts are included in manufacturing overhead because they cannot be directly identified with specific products.
Figure # 1: Elements of a product. Source: self made.
study-of-the-theoretical-framework-of-management-accountingAt that time I only know that direct materials and direct labor were considered, thus not addressing the problem of analyzing indirect manufacturing costs. Furthermore, the information provided by these very traditional systems was not used to make competition or market decisions.
In the 19th century and in the 40s of the 20th century, a higher stage of Industrial Capitalism with a greater technological and business boom developed, and it is where indirect costs began to be taken into account as the most developed aspect of Cost Accounting. Later in the 1950s, when the costs of establishing responsibility centers were incorporated, Cost Accounting became the center of Management Accounting, considering that the information was more accurate and contributed to decision-making.
As of this date, the need to improve the aforementioned aspects became the fundamental concern of many researchers and professionals related to Cost Accounting.
In the following two decades and as a result of these investigations, numerous works were published, which contributed to determining the fundamental aspects of Management Accounting (Guillermo, 2003):
- Implementation of the transfer pricing technique, to solve the problems derived from the section of services between sections, in the context of the centers of responsibility, enunciated by Hirshleifer (1956 - 1957).Development of the analysis techniques derived from costing direct costing, mainly studies on deadlock and costs – volumes of operations – benefits, aimed at changing the very restrictive hypotheses enunciated at the beginning (Jaedicke, 1961; Charnes and Cooper, 1963; Jaedicke and Robicheck, 1964) Traditional strategic planning and management control in the context of the budget system, described by Anthony (1965), which contributed to differentiate different levels in the area of planning and control.In-depth studies on the allocation of costs in joint production and its arbitrariness, where the main contributions were made by Shapley and Shubick (1969) and, Thomas (1971). Theory regarding the decentralization of companies in decision-making, assuming responsibility for effective coordination and motivation (Simón (1977), presented the most important advances in this field). Theory of the agency to the system of relations established in descending order between superiors and subordinates within the organization, where the works initiated by Holmstrom (1975), continued by Shavell (1979) and perfected by Baiman (1982) stand out.Theory regarding the decentralization of companies in decision-making, assuming responsibility for effective coordination and motivation (Simón (1977), presented the most important advances in this field). Theory of the agency to the relationship system that is they establish in a descending way between superiors and subordinates within the organization, where the works initiated by Holmstrom (1975), continued by Shavell (1979) and perfected by Baiman (1982) stand out.Theory regarding the decentralization of companies in decision-making, assuming responsibility for effective coordination and motivation (Simón (1977), presented the most important advances in this field). Theory of the agency to the relationship system that is they establish in a descending way between superiors and subordinates within the organization, where the works initiated by Holmstrom (1975), continued by Shavell (1979) and perfected by Baiman (1982) stand out.where the works initiated by Holmstrom (1975), continued by Shavell (1979) and perfected by Baiman (1982) stand out.where the works initiated by Holmstrom (1975), continued by Shavell (1979) and perfected by Baiman (1982) stand out.
To delve into the origin and development of Management Accounting, it is important to have to define the concepts of costs and expenses as terminology to follow. There are different criteria of the specialists about them, therefore there is no perceived similarity so far. Among the authors studied in this regard, the following stand out: Marx (1867), Pedersen (1958), Lawrence (1960), Horngren (1969), Polimeni, Fabozzy and Adelberg (1990) and Mallo (1991).
Cost is defined as the amount paid to obtain a product / service and an expense as a cost that has generated a benefit and has already ended.
These arguments lead to an analysis between Traditional Accounting and Management Accounting.
There are different methods to record and calculate the Traditional or Conventional Costs (Figure # 2).
Figure # 2: Methods for recording and calculating Traditional or Conventional Costs. Source: self made.
Due to their registration form they can be:
Historical or Real Costing: It offers as a result the costs actually incurred in the production or service and has the disadvantage that it lacks a norm or plan to exercise its control and determine its correlation. Furthermore, recording and calculation generally produces late and inoperative results.
Estimated or standard Predetermined Costing: It is the previous determination of the amount of resources necessary to execute a given production or service, and has the advantage that the difference between the real and the regulated can be the object of analysis of future planning of the process, thus contributing to the control of actions in the company. It is used in order to achieve greater efficiency and control of production factors. The standard costs represent what the cost should be, that is why the production cost estimate is made.
The advantages of the Standard Cost are set out below:
- They represent measurable and achievable objectives and, therefore, provide the basis on which the analysis of deviations detected and accounted for must be supported. They are the basis for the preparation of budgets, financial studies and pricing policy. They allow administrative efficiencies in the valuation of transactions that affect the entries and exits of inventories.
Due to its calculation, the costing methods can be:
Absorption Costing (Full Costing) or full costs: Defined as the approach by which all direct and indirect costs, including indirect costs of fixed manufacturing (rent, insurance, taxes) are charged to the cost of the product. Complete cost systems provide a greater amount of information that is not relevant to the product, therefore the information it provides does not satisfy the requirements of the competition.
Advantages:
- Compare the final cost of a product with its sale price, and consequently measure its profitability; Study in detail the different moments of the accounting process in terms of costs; Offer an assessment of the permanent inventories of finished products and products in progress.
Currently, its main limitations lie in:
- It does not offer adequate information to make certain decisions about the manufacture or not of a certain product. It does not provide the necessary information to establish a correct pricing policy. Given the inflexible principle of having to apply everything, distribution procedures are used. the truly arbitrary indirect costs, which brings no benefit.
Direct costing or variable costing (Direct Costing): It is considered as the method by which all direct and indirect variable costs, that is, excluding the fixed part of manufacturing indirect costs, are charged to the product. This method considers fixed indirect costs as period costs, that is, they are charged to results and not as a cost of the product.
Among the fundamental aspects that characterize the direct cost method are: a) It only considers variable costs as product costs; b) Fixed costs are considered as accounting period costs in which they are applied and, c) Fixed costs are excluded from the industrial valuation of the final products.
Advantages offered by this method:
- It allows to identify the relative participation of each product in the results of the company. It facilitates decision making in the different cost analytical centers regarding the optimization of the costs controllable by its managers. It reduces the arbitrariness in which many times it incurs, when trying to distribute the fixed costs among the products manufactured in a period. It allows to calculate the break-even point and guide the sales price policy by zones. In the case of under-activity or shortage of orders, it allows to determine the prices accurately limits below which the manufacturing of the product is of no interest.
Limitations of the method:
- It is unsuitable for determining product costs on farms with differentiated production programs. It further complicates the problem of joint cost sharing. It may lead to distorted information on the costs of cost analytical centers, by not taking into account their structure loads.
Traditional Cost Accounting is a classic form, characterized mainly by providing information that helps internal decision-making in the organization, ensuring the registration and control of product costs, associated with the volume of production, that is, with a purely internal and limited vision of the Company; with a formal and rigid profile, focusing its attention on the resources consumed by the product and not on those aspects that truly contributed value in the process of elaboration of these, the value is a set of activities carried out with a certain purpose, which pursues a global object and that can derive in a material or immaterial output.
The cost calculation methods that have traditionally been applied in the field of Cost Accounting are methods inherited from the industrial organization in force in the first half of the 19th century. It was, then, about competing in limited markets and with very specific products. Production costs used to be fundamentally direct, since the output obtained by companies corresponded in many cases to a single production.
The current development of technology has led to the acceleration of Management Accounting, not only from a theoretical point of view, but from the perspective of the adoption and implementation of systems with a philosophy of activities, and with a management focus.
The Management Accounting main information system of the organization has to capture, record, process and transmit all the information, internal and external, to address the decision-making process that occurs in the company, reporting on all the variables of the environment and the organization itself that may have a significant influence on business performance, being known as a process the set of activities carried out for a certain purpose, which pursues a global object and which may lead to material or immaterial output.
Given the aforementioned dynamics of the economic environment, the need for Management Accounting to advance in a manner consistent and consistent with that environment has become imperative, and therefore this discipline is currently showing a new development and encompassing realities and plots that are not even I had planned to analyze some years ago.
Thus, it can be affirmed that Management Accounting is subjecting the internal production and control systems to a profound renovation and, consequently, to the management systems of companies, in which the idea that minimization is being abandoned of costs constitutes the axis of competitiveness, this is because the products must be competitive not only exclusively in terms of costs, but in relation to qualitative factors such as quality, response times of supply of orders of the customers etc. Everything has determined the need to carry out, firstly, a rethinking of the companies' cost systems and, secondly, of the control systems linked to them.
All the advances experienced in both content and instruments by Management Accounting have served to enhance concepts such as that related to the Cost and Activity-based Management system (ABC / ABM).
As early as the 1960s and 1970s, some companies began to appreciate the aforementioned limitations of traditional Cost Accounting. Perhaps it can be said that General Electric was one of the first companies to incorporate the analysis of activities in the late 1960s, using this information on activities as management tools through activities, whose information allowed companies to discover opportunities to improve productivity, information that could not be obtained with traditional systems. However, it was not until the 1980s that the activity model really began to be used as an instrument of control and cost management.
In the 80s, several researchers (Cooper, Kaplan, Polimeni, Mallo, Ripoll, Amat, Amat J., Fabozzi and, Porter), proposed that traditional cost systems, based on the hypothesis of long production cycles of a standard product, had unalterable characteristics and specifications and whose cost was largely composed of that of labor, expressing that the other elements of cost (direct material and indirect manufacturing costs) were not relevant at that time. At this stage the need for a change in Cost Accounting was already perceived, a system was required that eliminated the slowness and complexity of the information, that reduced costs, that the information it provided was understandable, timely and accurate, and that increase management levels, that is,get to Management Accounting.
In the works of different authors, the factors that have determined the obsolescence of the traditional management systems implemented for conditions different from the current ones were analyzed and can be summarized as follows:
| Table # 1: Factors that have determined the obsolescence of traditional management systems. | ||
| YEAR | AUTHOR | LIMITATIONS |
| 1985 | Millar and Vollman | Lack of cost visibility. |
| 1987 | Cooper | The systematic distortion of the cost of products, caused by the use of methods based on the volume of production to absorb indirect costs. |
| 1988 | Cooper and Kaplan | Lack of analysis of costs in non-productive units. |
| 1988 | Cooper and Kaplan
Johnson and Kaplan |
Lack of relevance of cost information for decision-making. |
| 1989 | Berliner and Brimson | Lack of information on costs available in the pre-production stages and throughout the life cycle of the product or service. |
| Source: self made. |
In the comparison between Traditional Costs and Management Accounting, he highlights that the latter is based on the ability to maintain a stable system or on the ability to ensure the efficiency, effectiveness and effectiveness of the decision process. This approach tries to integrate all the factors in order to achieve improvements in the organization, thereby facilitating internal and external decision-making. It integrates quantitative and qualitative financial and non-financial indicators in its analysis, raising the demand for a change in approach to management control systems, which helps to improve productivity, thus contributing to monitoring the factors that determine business competitiveness (quality, customer service, fast deliveries) and systems that motivate staff and evaluate their performance (Nogueira Rivera,2002).
The analysis of management-based systems is inherent to the study of Management Accounting. Therefore, the next section will address the beginnings of the emergence of the Cost and Activity Based Management (ABC / ABM) system.
Need for the Emergence of the Cost and Activity Based Management (ABC / ABM) system.
The use of an Activity Cost system acquired special relevance in a controversial and dynamic environment such as the final stage of the 20th century. Given the conditions in which business managers needed information that would allow them to make decisions regarding the combination and design of products, as well as technological processes, elements linked to the profitability of the organization on a global scale.
In this sense, it is convenient to point out some of the relevant changes that affect the cost calculation and management system, highlighting the following (Amat and Soldevila, 1998):
- Technological advances and increased competitiveness lead to the need to increase the product catalog, simultaneously with the fact that the life cycles of these products are increasingly shorter. To reduce investments in assets and thus be able to operate with better financial costs, There is an increasing need to reduce inventories, which requires shorter production runs. These technological advances also have an impact on a reduction in the weight of direct labor as indirect costs increase. This is due to the need for organizations to be more flexible and customer-oriented, which causes a greater weight of costs related to research and development, shorter series launches, production scheduling, logistics, administration and commercialization.This generates a greater weight of indirect costs. Need to avoid activities that do not generate value in cost centers.
These changes cause the need to impute indirect costs to cost objectives (products, customers, services, among others) in a more reasonable way, as they are done in conventional cost systems. This is a consequence of both the need for more detailed cost information and the loss of reliability of conventional cost-sharing criteria.
In conventional methodology, costs are assigned to products at the unit level; This assumes that all costs depend on the volume of production, while in the ABC system, although costs are also assigned at the unit level, in many cases the allocation is made at the batch, product or infrastructure level. This means establishing a differentiation between the different types of activities that have been carried out throughout the manufacturing process and identifying the way in which each product has consumed activities.
The aforementioned corroborates that the calculation of product costs has gone into the background, prioritizing their management, but emphasizing the activities that consume the products or services.
The analysis of cost management starts in principle from the processes that occur in the company, since these derive in various activities that guarantee the product / service that the customer demands.
On the origins of ABC Jhonson (1993), noted that "there are two paths that lead to the current ideals of analysis by activities." Both paths are born in the business world and not in the academic world. Some management accountants in academia, notably Gordon Shillinglaw at Columbia and Geoge Stabus at Berkeley, outlined activity-based analysis concepts in the early 1960s. However, the activity concepts they enunciated seem to have had no influence. academic thinking (except today), nor do they seem to have had an impact on the two developments of ABC / ABM in the business world.
The first development begins in the early 1960s at the General Electric Corporation (GE), where finance and management control employees were looking for better information to control indirect costs. In this sense, the GE accountants more than 40 years ago, may have been the first to use the word activity to describe a task that generates costs.
The other path leading to the system appears to have originated independently of the progress made by GE in costing activities. The method is derived from the efforts of companies and consultants in the 1970s to improve the quality of Cost Accounting information.
In other studies on the subject, four basic moments are identified. A first moment is related to Church's work, in the first decades of the 20th century; This author emphasized the study of the causes that generate indirect costs, however, his proposal was to collect and store an enormous amount of data that required a complete and intensive analysis of them, something that in traditional accounting was not possible, reason why the difficulty arises that the determination and analysis of costs had to be done manually, which implied higher costs; this being the reason why Church's model was not widely accepted in his time. This author,He understood that accountants made mistakes in distributing indirect costs on a single activity basis related to direct costs, usually direct labor. Which brought with it a very arbitrary way of allocating or prorating indirect costs to the product. In this sense, it stated that the real source of costs were the underlying processes and that these should serve as the basis for the imputation to individualized products, to allow their reduction and control, thus avoiding waste.stated that the real source of costs were the underlying processes and that these should serve as the basis for the imputation to individualized products, to allow their reduction and control, thus avoiding waste.stated that the real source of costs were the underlying processes and that these should serve as the basis for the imputation to individualized products, to allow their reduction and control, thus avoiding waste.
There are other investigations on the subject in which the so-called Platzkosten, created by Mellerowicz in the 1950s, stands out in a second moment; in a third moment the costing method proposed by Staubus (1971) was highlighted and finally in a fourth moment the transaction-based costing, proposed by Miller and Vollman (1985), which was later disclosed by Johnson and Kaplan. In the case of Mellerowicz's work, it had no major repercussion and was forgotten.
However, Staubus (1971), had a greater acceptance, so much so that a large number of scholars on the subject consider the origin of Costing based on Activities based on the proposals made by the author in that publication, where he raises the need that Accounting Information Systems will provide managers with everything they need to make sound decisions and pay special attention to various aspects of Cost Accounting, including: the meaning of costs and the identification of relevant costing objectives..
Finally, the great disclosure that Activity-Based Costing currently has is due to the Johnson and Kaplan book: "Relevant losses: emergence and failures of the Accounting Administration" published in 1987, where the changes that were taking place in the production and marketing process, due to the new programming and control techniques that were being put into practice; It facilitates the search for new tools for determining and analyzing costs, in tune with the new environment in which businesses develop.
There is one element in common that all of these researchers present and it is their concern to optimize the return on capital, based on the reduction and control of costs, elevating their management and reducing waste where possible.
Based on the above criteria, we will delve into the next section on the ABC / ABM system.
ABC / ABM doctrinal foundations.
The activity-based cost system (ABC) arises with the aim of improving the calculation of the cost of any cost objective (Cooper and Kaplan, 1988). Activity is understood as the set of tasks that generate costs and that are oriented to obtaining output to increase the added value of an organization. They are carried out to satisfy clients' needs, whether internal or external (Amat and Soldevila, 1998). These tasks can be carried out by an individual or a group, they are supposed or give rise to specific knowledge or doing; with a homogeneous character from the point of view of its cost and execution behavior, which allows obtaining an output, aimed at satisfying an external and internal customer and this through the use of a series of inputs.
This system is based on the fact that activities consume resources and that products or services consume activities (Cooper and Kaplan, 1988), allowing the cost of activities to be related to any cost objective (Figure # 3). This process is developed, first, assigning to the activities the cost of the resources consumed by them, later, the cost of the activities consumed by them is assigned to each cost objective, through the inductors or cost generators which are the cause of the costs of the activities. The activity measure does not have to coincide with the cost-driver. The best cost inducer of an activity will be the cause of it (Blanco, 2000).This system can be used to improve the allocation of indirect costs against any cost objective but, nevertheless, it is conceived more as a model of resource consumption, whose ultimate objective is business management, providing information for decision-making, such as the analysis of the profitability of products or services, the estimation of the cost of activities, the estimation of the impact on the cost of activities in the face of improvements in certain operations of the organization and motivation of employees to favor their behavior before the system. Thus, the use of ABC is aimed at improving the calculation of the cost of any cost objective, in order to provide relevant and timely information for decision-making.It is conceived more as a model of consumption of resources, whose final objective is business management, providing information for decision-making, such as the analysis of the profitability of products or services, the estimation of the cost of activities, the estimation of the impact in the cost of activities in the face of improvements in certain operations of the organization and motivation of employees to favor their behavior before the system. Thus, the use of ABC is aimed at improving the calculation of the cost of any cost objective, in order to provide relevant and timely information for decision-making.It is conceived more as a model of consumption of resources, whose final objective is business management, providing information for decision-making, such as the analysis of the profitability of products or services, the estimation of the cost of activities, the estimation of the impact in the cost of activities in the face of improvements in certain operations of the organization and motivation of employees to favor their behavior before the system. Thus, the use of ABC is aimed at improving the calculation of the cost of any cost objective, in order to provide relevant and timely information for decision-making.the estimation of the cost of activities, the estimation of the impact on the cost of activities in the face of improvements in certain operations of the organization and motivation of employees to favor their behavior before the system. Thus, the use of ABC is aimed at improving the cost calculation of any cost objective, in order to provide relevant and timely information for decision-making.the estimation of the cost of activities, the estimation of the impact on the cost of activities in the face of improvements in certain operations of the organization and motivation of employees to favor their behavior before the system. Thus, the use of ABC is aimed at improving the cost calculation of any cost objective, in order to provide relevant and timely information for decision-making.
Figure # 3: Fundamentals of the ABC system. Source: self made.
There are numerous classifications of activities, so certain groups will be referred to according to different points of view.
- Its performance with respect to the product or service. Classification according to the scope of action. Classification according to the frequency of execution. Classification in conditioned and unconditional activities. Classification according to value.
With the passage of time, the activity-based cost system (ABC) has evolved, extending the initial objective sought by said system, and developing the so-called activity-based management system (ABM). ABM is a management philosophy focused on planning, executing and measuring the activities that are carried out in the company (Sharman, 1994). This technique, based on Porter's value chain (1989), focuses on the analysis of the activities carried out in the organization, in search of continuous improvement, trying to identify and eliminate those activities that do not contribute to generating value., both to the internal and external clients and, in turn, improve the contribution of the remaining activities.
The term ABC / ABM appears due to the need to calculate and manage the cost of activities, therefore it is considered by experts as a comprehensive system.
This comprehensive system argued at the beginning that companies should manage activities and not costs as such. Costs alone are not a source of competitive value since only activities have the power to add value. Therefore, management must seek, control and eliminate waste of efforts, that is, those activities that do not add value. With this system, the calculation of costs loses relevance to be transferred to the management of activities. (Figure # 4)
In the theoretical field, there are certain works that focus on criticizing the basic principles of the ABC / ABM system, but most researchers consider that these systems are superior to traditional cost calculation and management methods, due to the contributions they make.. Among the contributions made by this system can be noted:
| Table # 2: Contributions of the ABC / ABM system. | ||
| YEAR | AUTHOR | INPUT |
| 1992 | Castelló | Improves the accuracy of costing for any cost target. |
| 1994 | Amat | It improves the determination of the profitability of any cost objective. |
| 1998 | Serra | Avoid potential cross subsidies between cost targets. |
| 1991 | Brimson | The outputs are higher than those obtained with conventional systems. |
| 1991 | Brimson | It allows the calculation of information on past or future costs through so-called activity-based budgets. |
| 1988 | Cooper and Kaplan | The information provided regarding decision-making is more relevant than that generated by conventional cost systems. It allows knowing the causes that originate the costs, the information obtained will be more understandable to evaluate the management. |
| Source: self made. |
The ABC / ABM applies the concept of analysis of activities to obtain a process-oriented cost (sequence of activities or tasks that allow achieving a certain objective) and information on the actions that enable the continuous improvement of such processes. The application of activity analysis within Management Accounting has focused on calculating the cost of the product. Through this methodology, the aim is to distribute the costs of the activities based on the demand that the various products have generated within the production system.
This methodology allows establishing the existing relationships between the cost of activities and the characteristics of the processes, being able to obtain fairly accurate cost information both in relation to the product and the processes.
The ABC / ABM methodology involves a comprehensive analysis of the characteristics of the company, and of the work it performs, and allows monitoring of the allocation of costs from activities to finished products. Subsequently, an investigation of alternative scenarios can be carried out to improve cost management and processes.
The activity-based cost information system tends to provide a clear vision of how the combination of the various products that the company offers, and each of its activities, contribute in the long term to its progressive improvement.
For the emergence of this system, there must be a changing economic environment in which companies operate; technological innovation boom in companies to face competition; need to satisfy customer needs; internationalization of the markets; shortening the life cycle of products; need for information for decision-making and business management; existence of insufficient cost systems; limitations of traditional cost systems and business competitiveness diversification of production.
There are multiple factors that act on the ABC / ABM system, including: employee motivation; the quality of the information; information systems; staff training; internal and external clients; competition; Providers; the managers, the strategy, the size and the culture of the company; the existing management system; the value chain; existing cost systems; time; among others.
Advantages and limitations of the ABC / ABM system.
The advantages provided by the ABC / ABM system are the following:
- a) organizations with multiple products can observe a completely different ordering of the costs of their products; b) a better understanding of the activities that generate the costs structurally can improve the control that is executed over the costs incurred of that nature; c) can create an information base that facilitates the implementation of a total quality management process, to overcome the problems that limit current results; d) the use of non-financial indicators to assess cost drivers; e) facilitate management measures, in addition of measures to assess production costs.
These measures are essential to eliminate waste and non-value added activities, and cost driver analysis provides a new perspective for examining cost behavior and the subsequent analysis required for planning and budgeting purposes. In this sense, the ABC system increases the credibility and usefulness of cost information in the decision-making process.
According to Amat and Soldevila (1998), the advantages of the model are:
- a) it is applicable to all types of companies; b) it identifies customers, products, services or other unprofitable cost objectives; c) it allows for a more precise calculation of costs, fundamentally determining indirect costs of production, marketing and administration, and, d) provides more information on the activities carried out by the company, allowing knowing which ones provide added value and which do not, giving the possibility of reducing or eliminating the latter.
ABC / ABM costing helps organizations get better information about their processes and activities by continually improving the efficiency of operations. This system works to rationalize and optimize the development of its personnel, its capital and its remaining assets.
The new activity-based organization becomes more agile and market-oriented, allowing it to face a more competitive market. In turn, it enables the organization's information to be aligned with its mission and business operations, rather than with financial transactions. Also, it destroys the barriers that separate financial information from the rest of the data, thus facilitating the flow of information for decision-making. In another sense, it allows the organization to manage its overall cost structure without losing sight of the details of daily operation. Additionally, organizations can extend cost management to reflect the activities being performed.
Every management system, no matter how much it has been addressed or how much it has been perfected, is not without limitations and this is the case with the ABC / ABM system. Some of these limitations are summarized in:
1) there is little evidence that its implementation improves corporate profitability;
2) there are no known consequences regarding human and organizational behavior;
3) the information obtained is historical;
4) the selection of cost-drivers and costs common to various activities are not satisfactorily resolved; and
6) In the areas of control and measurement, its applications are still uncertain.
It should also be borne in mind that the activity-based cost system is established as a business management philosophy, in which all the individuals that make up the company must participate, from the workers and plant workers to senior management, that by having all the productive sectors covered, the company is led to achieve competitive and comparative advantages compared to the entities that carry out the same activity. In other words, advantages can be obtained over companies in the same sector or productive or service branch.
Conclusions:
- It is demonstrated, through the bibliographic review, that the most important events in Management Accounting have notably influenced the emergence of new systems, such as ABC / ABM. Through the doctrinal foundations, the logic of why the activities and not products, which incur costs. ABC / ABM takes the advantages of traditional systems, perfecting them based on the limitations they present according to the current precedent. Analysis of the evolution of the configuration of the Cost and Activity Based Management makes it easy to determine the scope you want to achieve the procedure to be proposed.
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Guillermo, Y. (2003): “Design of the Activity-Based Cost System at the Arenas Doradas Hotel.” Undergraduate thesis. Directed by MSc. Pilarín Baujín. Matanzas University.
Marx, C. (1973): First Section "The transformation of surplus value into profit and of the share of surplus value into profit share." Chapter I "Cost of production and profit." In "Capital." Criticism of Political Economy. Cuba: Social Sciences Publishing House, Volume III, p. fifty.
Pedersen, HW (1958): "The Costs and the Price Policy". Madrid: Editorial Aguilar, 2nd Edition, P: 6.
Lawrence, WB (1960): "Cost Accounting". Unión Tipografía: Editorial Hispano América, Volume I, P: 2.
Horngren, Ch. (1969): "Cost Accounting in business management." Cuba: Editorial de Pueblo y Educación, 1969, p. twenty.
Polimeni, Ralph S.; Fabozzi, Frank J.; Adelberg, Arthur H. (1990): “Cost Accounting. Concepts and Applications for Management Decision Making ”. Mexico: Editorial Mc Graw - Hill, 2nd Edition, P: 11.
Mallo Rodríguez, C. (1991): “Analytical accounting. Costs, Returns, Prices and Results ”. Ministry of Economy and Finance of Spain: Institute of Accounting and Accounts Auditing, 4th Edition, P: 410.
Blanco, MI (2000): “Research in Management Accounting.” VI Conference on Cost Accounting and Management.
Miller, JG and Wollmann, TE (1985): "The Hidden Factory", Harvard Deusto Business Review, pp. 142-150.
Cooper, R. (1967): “Does Your Company Need a New Cost Sytem?”, Journal of Cost Managemen, pp. 45-49.
Cooper, R. and Kaplan, RS: "How Cost Accounting Systematically Distorts Products Costs", Management Accounting, April 1988, pp. 20-27.
Johnson, HT and Kaplan, RS (1988): "Cost Accounting: Rise and Fall of Management Accounting", Spain, Ed. Plaza & Janés.
Berliner, C. and Brimson, JA (1989): “Cost Management for Today's Advanced Manufacturing. The CAM-I Conceptual Design ”, Harvard Business School Press.
Nogueira Rivera, D. (2002): "Conceptual model and support tools to enhance management control in Cuban companies." Thesis presented as an option to the Scientific degree of Doctor of Technical Sciences. Matanzas University. Cuba.
Amat, O. Y Soldevila, P. (1998): "Accounting and Cost Management." 2nd Edition. Ediciones Gestión 2000, Spain, pp: 133-151.
Johnson, T. (1993): "It is time to stop the overselling of Activity Based Concepts". Cost and Management Magazine, Spain, Publication T. II - No.8. P. 320.
Cooper, R. and Kaplan, RS (1988): "Measure cost right: make the right decision." Harvard Business Review.
Blanco, F. (2000): “Cost accounting and management analytics for strategic decisions.” 8th Edition, Ediciones Deusto SA, Spain, pp: 226-245.
Sharman, P. (1994): “Activity and Driver Analysis to Implement ABC”, CMA, pp. 13-16.
Porter, M. (1989): “Competitive advantages. Creation and sustenance of a superior performance". Mexico. Editorial Continental SA, Fourth impression, P: 62.
Castelló Taliani, E. (1992): “The activity cost system.” I Management Accounting Conference. Spain.
Amat, O. (1994): "Management Accounting in Market-Oriented Companies", in New Trends in Management Accounting, AECA, pp.143-164.
Serra, V. et al (1998): Management Accounting. Calculation, Analysis and Cost Control for Decision Making. Editorial Ariel, SA
Brimson, JA (1991): "Activity accounting: An activity - based - costing approach," John Wiley and Sons, New York.
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