Emergence and evolution of cost accounting
Accounting has a history that goes hand in hand with that of civilization itself. Regarding the history of cost accounting, it can be said that the implementation of cost systems in the beginning was based solely on the expenses made by people. It is believed that ancient Middle Eastern civilizations took the first steps in managing costs.
In early industries known as vineyard production, book printing, and steel mills, procedures were applied that resembled a cost system and that partly measured the use of resources for the production of goods.
In some industries in various European countries, between 1485 and 1509, rudimentary cost systems began to be used that bear some similarity to current cost systems. According to studies (Pérez Barral, 2008), some books were kept where the costs for the treatment of the products were recorded, these books compiled the production reports and could be considered as the current cost manuals.
In Italy, it is thought, "bookkeeping" arose by the double entry method, since this is a region with a lot of commercial influence, thus the first accounting texts were written for merchants since the manufacturing process was in the hands of a few artisans linked to associations and therefore subject to the rules of their guilds.
With artisanal production, accounting took off due to the growth of capitalist entrepreneurs and the increase in private lands, which gave rise to the need to have control over the raw materials assigned to it.
With the growth of the market and the forms of production the use of accounting became more necessary as a method of measuring the profits of merchants, producers, manufacturers and all those who had to do with mercantilism, for example in England it became indispensable the calculation of costs, due to the competition between wool producers in cities and villages at the end of the 14th century.
In 1557, winemakers began to use what they called "Production Costs", understanding as such what today would be materials and labor. The French publisher Cristóbal Plantin established in Antwerp in the 16th century, used different accounts for the various kinds of imported papers and others for the printing of books. It is also claimed that their accounting records included an account for each book in print until the costs were transferred to another stock-for-sale account.
The objective of Accounting at that time was to render an account report without differentiating between income and costs, without contributing to setting sales prices, or determining the net result of operations.
During the sixteenth century and until the middle of the seventeenth century, Cost Accounting experienced a serious recess, since from the point of view of science, progress was not made with respect to existing technology, making accounting inefficient.
In 1776, the rise of the Industrial Revolution brought the great factories. It went from artisanal to industrial production, creating the need to exercise greater control over materials and labor, and over the new cost element that machines and equipment originated. The "machinism" of the industrial revolution led to the displacement of labor and the disappearance of small artisans. Previous growth created an environment conducive to a new development of cost accounting.
In 1777, a first description of the costs of production by processes was made based on a company that manufactures linen yarn stockings. It showed how the cost of the finished product can be calculated through a series of double-entry accounts that it carried in quantities and values for each stage of the production process.
France was initially more concerned with pushing cost accounting. In this sense, in 1778, auxiliary books began to be used in all the elements that had an impact on the cost of products, such as salaries, work materials and delivery dates. Fruit of the development of the chemical industry is the appearance of the Joint Cost concept in 1800, although the Industrial or Technological Revolution originated in England. A sample was given by Payen (1800), who was the first to incorporate depreciation, rent and interest into a cost system for the first time.
A French glass manufacturer Gordard, published in 1827 a Treaty of Industrial Accounting in which he emphasizes the need to determine the price of raw materials purchased at different prices. In the last three decades of the 19th century, England was the country that dealt most with theorizing about costs. This is how, between 1828 and 1839 Babbge published a book in which he highlighted the need for factories to establish an accounting department that is in charge of controlling compliance with working hours. At the end of the 19th century, the author Metcalfe published his first book which he called Manufacturing Costs.
The major development of Cost Accounting took place between 1890 and 1915, in this period of time the basic structure of cost accounting was designed and cost records were integrated into general accounts in countries such as England and the United States and Concepts such as: establishment of procedures for the distribution of indirect manufacturing costs, adaptation of reports and records for internal and external users, inventory valuation, and estimation of material and labor costs were provided.
Until now, Cost Accounting exercised control over production costs and recorded its information based on historical data, but when the General or Financial Accounting and Cost Accounting were integrated between 1900 and 1910, it came to depend on the former.
But Accounting was beginning to be understood as a planning tool which demanded the need to create ways to anticipate simple historical economic events, as a result of this the emergence of predetermined costs between 1920 and 1930, when the American Taylor began to experiment standard costs at Bethlehem Steel, Company.
There is evidence that allows to affirm that the predetermined costs were used in 1928 by the American company Westinghouse before being spread by the great companies of the American union. These costs made it possible to have data before starting production, followed by the depression of the 1930s, during which the industrialized countries had to make considerable efforts to protect their capital.
After the great depression, great preponderance begins to be given to different cost systems and budgets as a key tool in the direction of organizations.
Among the reasons behind the new boom in cost accounting were:
- The development of the railways The value of the fixed assets used by the companies that made the need to control indirect costs appear The size and complexity of the companies and consequently the administrative difficulties they faced The need for have a reliable tool that allows them to set sales prices.
Before 1980, industrial companies considered their cost accumulation procedures to be industrial secrets, since the financial information system did not include the databases and files of Cost Accounting.
Unquestionably, this resulted in stagnation for it in relation to other branches of Accounting, until it was found that its application produced benefits.
Thus, in 1981, the North American Johnson, highlighted the importance of Cost Accounting and systems as a key tool to provide information to management about production, which implied the existence of useful cost files for the setting of adequate prices in competitive markets. In this way, the Cost Accounting of the General or Financial Accounting emerged.
Evolution of Cost Accounting and Management in Cuba
On the threshold of the Third Millennium, Cuba is in the process of improving its accounting regulation, with the aim of providing it with greater flexibility in its design, trying to achieve a strengthening in the role of accounting information as a real tool for systematic transformation of information in action by business management and simultaneously meeting the growing demands of external users.
On the other hand, the need for the evolution of Accounting in Cuba is largely conditioned by the convenience of homogenization with the most widespread and applied accounting practice in today's globalized world, an essential element for the economic integration of the country into the universe. of the International Community.
In this sense, with the existing economic system, accounting regulation has a totally public nature. The standardization of Cuban accounting is based on legal provisions issued by various organs of the State and its Central Administration, through laws, decrees - laws, decrees and other provisions of the National Assembly of People's Power, the Council of State and the Council of Ministers; Resolutions and Instructions of the Ministry of Finance and Prices; Resolutions and Instructions of Branch Ministries for compliance with companies and subordinate or sponsored agencies, as well as complementary provisions of Cuban Banking.
The Cuban accounting practice has a rich history that began at the end of the 19th century, consolidating in 1927 with the beginning of the Higher Studies in Accounting at the University of Havana, achieving its maximum splendor in the decade of the 50s, coinciding with the emergence of Management Accounting.
In the period prior to 1959, Cuban accounting standardization was highly influenced by North American accounting practice, it can be said that from 1959, the changes that occurred in national life were weakening the North American influence, in the 1960s, due to the primacy From conceptions later recognized as erroneous, the monetary-mercantile relations between companies disappear and accounting virtually with them, which is limited to economic control.
The accounting practice was reborn in 1975, but now it is highly influenced by the accounting conceptions that prevailed in the former socialist countries of Eastern Europe, as Cuba was one of the member countries of the Council for Mutual Economic Assistance (CAME). From that moment on, successive changes begin in Cuban Accounting, which can be framed in three stages of improvement:
1st stage (1977-1986): Establishment of an Accounting system implemented by means of a document containing the economic content of the accounts to be used and the aspects for which it was debited and credited; Information System; Rules and procedures; and illustrative examples.
The practical application gave rise to multiple additions and modifications that brought negative effects such as: excess of informative models, the accounting record was prioritized based on the information needs of higher levels, the initiative of accountants was stopped in order to comply with the management, the study plans in universities in Management Accounting are highly influenced by the member countries of CAME and lack a set of tools focused on managerial decision making.
2nd stage (1987-1992): There are transformations aimed at simplifying the National Accounting System, accounts and subaccounts are eliminated, functions are decentralized and models and annexes of the Information System are rationalized. However, the language was not comparable with that which was being dealt with at the international level, given the heritage of Cuba's participation in CAME, which was in direct contrast to the changes in the world context and the immediate and future projection of the Cuban economy.
3rd stage (1993-present): Great flexibility of Cuban accounting practice, communication with foreign partners by adopting terminology homologous with international accounting practice, the process of Business Improvement begins in which the various branches of Accounting play an important role. It can be said that the General Accounting Model of Cuba does not yet represent a result, but rather a process of evolution in full swing.
The Business Improvement is a process of continuous improvement of the internal management of the company, which makes it possible to achieve, in a systematic way, high performance to produce goods or provide competitive services, having as a fundamental objective to achieve the competitiveness of the company, increasing efficiency and efficiency, on the basis of granting it the powers and establishing the policies, principles and procedures that promote the development of initiatives, creativity and individual and collective responsibility.
Previously, it has been tried to synthesize the historical development of Cuban Accounting in general, necessary to know the evolution of Management Accounting in Cuba. Today, Management Accounting specialists in Cuba are closely linked to the new requirements of the current productive environment where the globalization and internationalization of markets, the growing uncertainty and turbulence of the environment and other characteristics of the business environment are entering the Total Quality Management, using the cost of quality as a basic management tool, the approaches of the theoretical schools of Juran, Deming, Crosby and the Japanese approach are studied; trying to adapt these to the specific characteristics of the Cuban economy, just as it happens with the Just-in-Time (JIT) philosophy,for the control of inventories and production, emerged in Japan in the 70s.
Cuban companies are assimilating the changes in traditional cost accounting, by new management methods, supported by universities and the National Association of Accountants and Economists, today not only disciplines such as probability and statistics are used to calculate the cost of a product and elaborate useful information in making planning and control decisions, but also rely on the use of fuzzy logic, applying this tool to company management to mitigate the uncertainty of the business world, capital is studied intellectual, trying to create a model to calculate and manage intangible assets that have their origin in the knowledge, skills and attitudes of the people who are part of the nucleus of the institution. In the 80's,Other studies in Cuba focus on the philosophy of value, delving into the analysis of the value chain, in connection with the use of Activity-Based Budgeting (ABB), Activity-Based Costing (ABC) and Activity-Based Administration (ABM).
Even though since the 80s, the studies and theoretical analysis of the Systems with philosophies of activities have increased, their state in practice does not show the same development, not using all the potentialities of Management Accounting within business management, even when it is what is regulated in the Cuban Business Improvement.
Despite introducing important changes in the structures and operation of companies to adapt them more to international accounting practice, the new techniques that have taken boom in the world market are not used, for example, costing systems by objectives, budgeting and administration based on activities, the Just-in-time technique, Marketing costs, Environmental Costs, Intellectual Capital and Knowledge Management. The application of these techniques is fundamentally limited by the technology of the entities and the functioning of the market in Cuba, which is insufficient and not very competitive from the internal point of view.
Definition of cost accounting
Cost Accounting, also called Analytical Accounting, is one of the parts of Management Accounting and focuses on calculating costs of services or products offered by the company.
Among the specific objectives of Cost or Analytical Accounting, the obtaining of information with a short-term perspective stands out for:
- calculate the costs of the different parts of the company and of the products that are obtained; know what each stage of the production process costs that adds value to the product or service; inventory valuation; analysis of the accounting result generation process; contribute to the control and reduction of costs and make strategic decisions: eliminate a product or enhance it, subcontract a service or a stage of the production process, set sales prices and discounts.
In this sense, the accountants of the companies must seek the maximum efficiency in the information, therefore the concepts that will be handled according to the decision making must be correctly left. The concept of cost must be expanded beyond the accounting postulates to definitely include economic concepts and criteria as well.
To delve into the terms used in Cost Accounting, it is necessary to remember some concepts that will help to understand the results that are intended to be achieved in the research and that are still valid in the various investigations carried out by different authors (See Table 1.1).
| Authors / Year | Cost Concept |
| French General Accounting Plan (1957) | “The price of the cost of an object, of a presentation, of a group of objects or presentations, is all that this object, this presentation, this group of objects or presentations has cost in the state in which they are in the final moment ”. |
| Pedersen (1958) | "It is the consumption valued in money of goods and services for production that constitutes the objective of the company." |
| Taken from Pérez Barral (2008) | According to Pedersen, the cost of an article is the sum of all the disbursements or expenses, made in the acquisition of the elements that go into its production and sale. |
| Schneider (1962) | "It is the monetary equivalent of the goods applied in the production process." |
| Backer and Jacobsen (1967) | “Costs represent that portion of the purchase price of articles, properties or services, which has been deferred or which has not yet been applied to the realization of income. Fixed assets and inventories are examples of these deferred costs. Expenses are costs that have been applied against income for a specified period. Office salaries are expenses for the period during which they occur ”. |
| Polimeni; Fabozzi and Aldelberg (1990) | “Cost is the value sacrificed to obtain goods and services. The sacrifice made is measured in dollars by reducing assets or increasing liabilities at the time benefits are realized. At the time of acquisition, the cost is incurred to obtain present or future benefits. When the benefits are realized, the costs become expenses. An expense is defined as a cost that has produced a benefit and is expired. The unexpired costs that may give future benefits are classified as assets ”. |
| May (1991) | “The cost does not arise until the consumption is made, for which reason it cannot be identified in the expense concept that proceeds to the cost. While the concept of cost attends to the moment of consumption, the expense refers to the moment of acquisition ”. |
Table 1.1 Cost Concepts. Source: self made
The concept of expense is broader, it reflects the consumption of any resource during a period of time that the production process lasts, regardless of its destination within the company.
Equity Accounting has two fundamental objectives:
- Report on the status of the entity (Balance) and evaluate the changes that occur in capital as a result of the activities (Statement of Income). The reports related to the cost affect both, since the cost of the unsold producers is reflected in the first and that of those sold in the second. Therefore, the cost accounting system is not independent from the equity accounts.
Cost Accounting deals with the classification, accumulation, control and allocation of costs. Costs can accrue across accounts, jobs, processes, products, or other business segments.
The formal Cost Accounting system generally provides cost information and reports for the accomplishment of the first two objectives. However, for management's planning and decision-making purposes, this information should generally be reclassified, reorganized, and supplemented with other pertinent business and economic reports taken from sources outside the normal cost accounting system.
An important function of Cost Accounting is to assign costs to manufactured products and to compare these costs with the income resulting from their sale.
Cost accounting features
The characteristics of Cost Accounting are as follows:
- It is analytical, since it is planned on segments of a company, and not on its total; it predicts the future, while recording the events that occurred; the movements of the main accounts are in units; it only records internal operations; it reflects the union of a series of elements: raw material, direct labor and manufacturing loads; it determines the cost of the materials used by the different sectors, the cost of the merchandise sold and that of the inventories; its periods are monthly and not annual as the of general accounting and, its implicit idea is the minimization of costs.
Cost Accounting is a branch of general accounting that synthesizes and records the costs of the manufacturing, service and commercial centers of a company, so that the results of each of them can be measured, controlled and interpreted, as through obtaining unit and total costs in progressive degrees of analysis and correlation.
Theoretical aspects of the Activity Based Cost System (ABC)
Management Accounting, aims to provide relevant information, historical or provisional, monetary or non-monetary, segmented or global, on the internal circulation of the company for decision-making, also allows quantitative and qualitative analysis of the information for decision-making. decisions.
The world, society, organizations, individuals and the environment tend to change rapidly, which is why all the things that surround these systems have to adjust to the rhythm of the rules that govern the new social, productive and business order.
The allocation of costs to the different cost objectives, especially the final objective that is the finished products, is without a doubt the most important problem to solve of any cost system. In addition, it is an unavoidable problem because the organization needs to have reliable, timely and accurate information on the cost of its products, for proper decision-making.
The cost calculation model for companies is of utmost importance, since these are the ones that determine the viability of the business, those that mainly determine the degree of productivity and efficiency in the use of resources, that is why a cost model it cannot be based solely on assigning costs on a certain factor, which for the business sector may be insignificant or not very representative of what it actually symbolizes.
Background to ABC Costs
The birth of Activity Based Costing (ABC), "is due to the need to solve the problem about the allocation of indirect manufacturing costs to products." Following Backer, the ABC was developed by professors Kaplan and Cooper from Harvard University in the late 1980s with the purpose of obtaining strategic information that would allow a more exact determination of the appropriate product mix and establish selling prices based on both cost and availability of customers' payment. To achieve a system with such accuracy, more cost allocation factors had to be added, which adequately measured the resources used by each product.
After reviewing the structure of this new costing, it was possible to see that the system could offer information of a higher quality and use than was originally planned since it included information on the operations carried out in the internal processes, the resources used and the objectives towards which they were directed.
The traditional ABC (60) had a problem: it was only designed to determine the cost of products and not for projects to improve internal processes, which limited the management levels that could be achieved with it.
There were certain limitations in its first stage of development, its primary limitation was the absence of direct information on the activities, especially because these were not defined by themselves and as a result of this, costs were not assigned to each activity.
This led to a second version of ABC costing, which was now made up of two different approaches; the first referred to the management and allocation of costs and the second to internal processes. With all this, information about the performance of the activities began to be generated and thus to be able to elaborate measures of performance of the activities with which both internal and external quality were sought, resulting in a structural elaboration for the ABC costing.
The creation of this type of costing, came to completely revolutionize the concept of costs since this system not only provides information on product costs but also generates information to improve the internal and external processes of the company.
The importance of the ABC management cost system is summarized in:
- It is a managerial model and not an accounting model; resources are consumed by activities and these in turn are consumed by cost objects (results); considers all costs and expenses as resources; shows the company as a set of activities and / or processes rather than as a departmental hierarchy and, it is a methodology that assigns costs to products or services based on the consumption of activities.
What is ABC (Activity Based Costing)?
This is a question that various entrepreneurs ask themselves in order to learn about the ABC / ABM system.
The activities are the whole set of elementary tasks and tasks whose performance determines the final products of production. Castelló (1994), Lizcano (1994) agree with this definition; Ripoll and Tamarit (2002).
Pérez Barral (2008) defines activities as the set of actions that are carried out to guarantee a service, they respond to the processes and are executed and classified according to their hierarchical level.
The ABC was developed as a practical tool to solve a problem that is presented to most of today's companies. Traditional Cost Accounting systems were developed mainly to fulfill the function of inventory valuation (to satisfy the standards of "objectivity, verifiability and materiality"), for external incidents such as creditors and investors. However, these traditional systems have many shortcomings, especially when used for internal management purposes.
The ABC cost system is based on the grouping in cost centers that make up a sequence of value of the products and services of the productive activity of the company. It focuses its efforts on the managerial reasoning in an adequate way of the activities that originate costs and that are related through their consumption with the final cost.
Likewise, it is important to know the generation of costs in order to obtain the greatest possible benefit from them, minimizing all the factors that do not add value.
The ABC aims to establish a set of actions that aim to create business value, through the consumption of alternative resources, which find in this connection their causal relationship of imputation.
The Accounting of Costs by Activities, proposes not only a model of calculation of costs by business activities, being the calculation of the products a material by-product, but not the main one of this approach, but constitutes a fundamental instrument of the analysis and strategic reflection of both the business organization and the launch and exploitation of new products, so its field of action extends from the conception and design of each product to its final exploitation.
In this sense, the question must be answered: Why the new cost systems instead of the traditional ones?
From the traditional cost point of view, these assign indirect costs generally using the products to be produced as a basis and they do so considering only the volume of production, unlike the ABC identifies that indirect costs are not attributable to products, but to the activities that are executed to satisfy a certain service.
According to the practical experience of the authors consulted, the ABC allows greater accuracy in the allocation of company costs and allows obtaining a greater vision of these by activity, understanding by activity according to the definition given by Solano (1998): «It is what makes a company, the way in which time is consumed and the outputs of the processes, that is, transforming resources (materials, labor, technology) into outputs ».
That is, they indicate the activity as: The action or set of actions that are carried out in the company to obtain a good or service. They are the core of cost accumulation.
The activities are made up of certain tasks. This means that today's information systems must have not only the traditional objectives of reporting information, but also facilitate analysis at all levels of the organization in order to achieve efficiency goals, analysis of indirect activities consumed by products in its preparation to correct and improve the distortions that arise, highlighting in the long term all the variable costs.
The model uses a more aggregated activity concept, that is, grouping different tasks within each activity, provided that two conditions are met:
- That there is homogeneity between the tasks aimed at directly obtaining a good or service or that help to obtain it. That they are capable of being quantified, using the same unit of measurement.
The ABC model foresees that a set of activities be identified, such that they eliminate the possibility of indirect costs with respect to them, eliminating themselves; in this way, the need to make secondary allocations between activities.
In order to identify the activities, they must be classified into:
According to their performance regarding the product.
- By product (prepare a shot of drink).
They are those that are necessarily executed every time a product unit is produced. The costs related to this activity refer fundamentally to raw materials, direct labor and use of the production equipment. By lot (equipment maintenance).
Are those activities carried out in the manufacture of a batch of a certain product. Costs vary based on the number of batches processed but are independent of the unit number of each batch. By product line (Organize labor).
Those executed to make possible the proper functioning of any line of the production process are independent of both the units produced and the batches processed.By company (Administration).
Those that act as support or general sustenance of the organization. They are common activities for all products, for the entire production process and are not directly involved in it.
According to the frequency.
- Repetitive (prepare materials).
Those that are carried out in a systematic and continuous manner have a specific objective. Non-Repetitive (Improve Design).
Those carried out sporadically or occasionally, have qualitative importance that in some cases gives them a fundamental character.
According to the ability to add value to the product.
- That add value to the product (perfect finish).
From the internal point of view they are those strictly necessary to obtain the product and from the external point of view they are those that, when applied to the product, increase the customer's interest in it. That do not add value to the product (Redo a product).
Internally they are those that when eliminated do not generate any problem for obtaining the product and externally they do not exert influence on the client in their prior appreciation.
The distinction between activities with or without added value acquires great importance to carry out correct cost management, therefore, it is important:
- Careful analysis of the activities that add value can provide the guideline to ensure that they only consume the resources strictly necessary to provide the service and in parallel to satisfy the customer.A careful analysis of the activities that do not add value helps even more In reducing costs, for example, verifying the quality of the merchandise received, it can be eliminated if the management focuses its efforts on eliminating the causes that cause it, demanding from suppliers supplies with the required quality.
Other important contributions of the ABC refer precisely to the activity measure. These activities are measured through so-called cost drivers, which are ultimately the drivers of costs or cost variability factors.
They can be defined as that factor whose incurrence gives rise to a cost, this factor represents a main cause of the activity, therefore there may be different inducers in a cost center. It is also feasible to define a cost driver with a factor used to measure how a cost is incurred and / or how to drive a cost portion of each activity that it consumes to each cost object. For the proper selection of an inductor, there must be a cause-effect relationship between the cost generator and its consumption for each activity and each cost object, in addition to being constant within a specific period of time, being timely, easy handling and measurement.
The 90s put the ABC System in crisis with certain limitations that were occurring in business practice and therefore its creators Kaplan and Cooper accept the criticisms made to it by various businessmen and then a new ABC emerges called then: ABC / ABM.
Through the short video that you can see below, you will be able to get a more specific idea of what ABC Costing is and what its main benefits are:
Origin of the Activity-based Cost and Management System (ABC / ABM)
During the early 1990s, activity cost research entered a second phase, which became known as Activity Based Management (ABM).
The combination of ABM / ABC is what some authors (Amat, Castelló, Lizcano, Ripoll and Tamarit) call Activity-based Costs and Management System. In this sense, it should be noted that ABM seeks to focus the management of indirect activities, at various levels beyond direct production / activity, to improve the value received by the customer and the benefit achieved that this value provides.
In this way, organizations find value in the information generated by the decision-making system and consequently consider them in accordance with their objectives and strategies.
The term ABC / ABM appears due to the need to calculate and manage the cost of activities, since all the authors mentioned above consider it a comprehensive and necessary system.
In an initial version of ABC / ABM, Jonhson (1988) and Ostrenga (1990) argued that firms should manage activities and not costs as such. Costs by themselves 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 effort, that is, those activities that do not add value. With this system, the calculation of costs loses relevance to transfer it to the management of the activities.
The important thing in the ABC / ABM system is the identification of the activities.
Objectives and characteristics of the ABC / ABM
What is the ABC / ABM and what are its objectives?
It could be said that it is a comprehensive management system, which allows knowing the flow of activities carried out in the organization that are consuming the available resources to which certain costs must be attributed to the processes.
The characteristics that define this system are:
- It is a comprehensive management system, where you can obtain information on financial and non-financial measures that allow optimal management of the cost structure, it allows you to know the flow of activities, in such a way that each one can be evaluated separately and valued the need for their incorporation into the process, with an overall vision. Provides objective assessment tools for cost allocation.
When should an ABC / ABM System be implemented?
In general, the ABC / M should be applied, when the percentage of indirect costs on the total costs of the organization has a significant weight, although it is true that its implementation would not make sense if it manufactured a single product for a client only.
A second case of application of ABC / M is in organizations where they are subjected to strong price pressures in the market and want to know exactly the composition of the cost of the products, since traditional management systems tend to incorporate indirect manufacturing costs in depending on the volumes of units produced or sold and therefore, some of the products may be subsidized at the cost of others, and ultimately, prices may be incorrectly defined.
A third case where the implementation of ABC / M could be advised is in organizations that have a high range of products with different manufacturing processes, and where it is very difficult to know the proportion of indirect costs for each product.
Finally, the recommendation for the implementation of ABC / M could even be proposed in organizations with high levels of structural expenses and subject to major strategic / organizational changes.
The last affirmation corroborates what Tamarit (2002) raised, when she states in her doctoral thesis that ABC / ABM is an innovative system.
Following the studies of Zaltman (1973), innovation can be defined as the adoption of an idea or behavior that is new to the organization, the essential thing being that the idea that is adopted is perceived as new by the area or social group, even when has previously existed in another form or in another area.
The ABC / ABM System is an innovation (Anderson, 1995; Shield, 1995; Gosselin, 1997 and 1999; Bjornenak and Mitchell, 1999; Innes, 2000; Nair, 2002; Tamarita, 2002; Kiani and Sangeladji, 2003; Stenzel and Stenzel, 2004). Some authors consider ABC / ABM as a novelty, and see its innovative character both from a theoretical and practical point of view (Cooper, 1988; Cooper and Kaplan, 1991, 1992 and 1998; Kaplan, 1992), not others, who they recognize only its theoretical character (Israelsen, 1993), or only its practical innovative character (Bjornenak, 1997; Nair, 2002; Kiani and Sangeladji, 2003).
The ABC / ABM System constitutes an innovation, theoretical and practical, developed within the scope of management accounting, and based as a system in constant evolution and adaptation to new information technologies, being susceptible to changes to achieve better results. related to: costs, management, information, decision making, and customer satisfaction. The very evolution that SIGECA has had in its four generations corroborates the above.
According to the appreciations of Bescos and Cauvin (2000) and, Tamarit (2002), the diffusion and expansion of the ABC / ABM System behaves in an unbalanced way, since the theory is at a fairly high level of diffusion and in practice it is assumed very slowly.
Following Bjornenak (1997), the expansion process must be analyzed both from the point of view of the supply of innovation, as well as the demand for it. In the case of those who choose to adopt the system, the degree of resistance to change may affect the type of decision to be made (whether or not to adopt ABC / ABM) for the company. Some authors have referred to the previous appreciation, among which are: Kwon and Zmud, 1987; Kaplan, 1990; Staubus, 1990; Bailey, 1991; Bhimani and Piggott, 1992; Cobb, 1992; Innes and Mitchell, 1992; Anderson, 1995; Reve, 1996; Foster and Swenson, 1997; McGowan, 1998 and 1999; Anderson and Young, 1999; Innes, 2000; Sievanen and Tornberg, 2002; Tamarit, 2002; Stenzel and Stenzel, 2004).
Thus, the questioning about the possible success or failure of a system generates an upward development in the evaluation of the system and constitutes in advance a challenge to increase not only its expansion but also its real adoption in organizations.
This means that the system can be adapted to the characteristics of any service or production company.
