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The incompatibility of standard costing systems and modern manufacturing: Insight or unproven dogma?

The incompatibility of standard costing systems and modern manufacturing: Insight or unproven dogma? The paper contends that the strategic use of accounting at times of organisational change does not of necessity mean that organisations should adopt new accounting systems ‐ such as activity based costing or throughput accounting. Although not necessarily fully “compatible” with new manufacturing methods, standard costing systems can still continue to be useful. The article examines the changing role of the accounting system in two manufacturing organisations that have introduced a range of new manufacturing techniques over the last decade. These have included reducing inventories, the elimination of constraints and increased investment in automation. Despite these developments, both companies have made few changes to their existing standard costing systems. Possible problems identified in the literature as inherent with standard costing systems were, at least in part, overcome through a range of adjustments to existing accounting and other reporting systems, with the accounting system recognised as providing only part of the information needs of operational management. Also, although changes to the manufacturing environment had taken place, they were not of such a fundamental nature that wholesale change to the accounting system was either required or could necessarily be justified in terms of cost/benefit. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Accounting Research Emerald Publishing

The incompatibility of standard costing systems and modern manufacturing: Insight or unproven dogma?

Journal of Applied Accounting Research , Volume 6 (3): 24 – Dec 1, 2002

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Publisher
Emerald Publishing
Copyright
Copyright © 2002 MCB UP Ltd. All rights reserved.
ISSN
0967-5426
DOI
10.1108/96754260280001030
Publisher site
See Article on Publisher Site

Abstract

The paper contends that the strategic use of accounting at times of organisational change does not of necessity mean that organisations should adopt new accounting systems ‐ such as activity based costing or throughput accounting. Although not necessarily fully “compatible” with new manufacturing methods, standard costing systems can still continue to be useful. The article examines the changing role of the accounting system in two manufacturing organisations that have introduced a range of new manufacturing techniques over the last decade. These have included reducing inventories, the elimination of constraints and increased investment in automation. Despite these developments, both companies have made few changes to their existing standard costing systems. Possible problems identified in the literature as inherent with standard costing systems were, at least in part, overcome through a range of adjustments to existing accounting and other reporting systems, with the accounting system recognised as providing only part of the information needs of operational management. Also, although changes to the manufacturing environment had taken place, they were not of such a fundamental nature that wholesale change to the accounting system was either required or could necessarily be justified in terms of cost/benefit.

Journal

Journal of Applied Accounting ResearchEmerald Publishing

Published: Dec 1, 2002

Keywords: Manufacturing techniques; Standard costing systems; Role of accounting

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