Darmowy fragment publikacji:
Tomasz Wnuk-Pel – Department of Accounting, Faculty of Management
University of Łódź, 90-237 Łódź, Matejki 22/26 Str.
REVIEWERS
Karim Charaf, Toomas Haldma, Monika Marcinkowska
EDITOR OF UNIVERSITY OF ŁÓDŹ
Iwona Gos
TYPESETTING
AGENT PR
COVER DESIGN
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© Copyright by University of Łódź, Łódź 2013
Published by Łódź University Press
First Edition. 6074/2012
ISBN (ebook) 978-83-7969-006-0
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e-mail: ksiegarnia@uni.lodz.pl
phone (42) 665 58 63, fax (42) 665 58 62
To my beloved wife Renata
CONTENTS
Introduction ................................................................................................................................. 9
Chapter 1. Origin and development of activity-based costing .............................................. 19
1.1. Precursors of activity-based costing .............................................................................. 19
1.2. Development of activity-based costing in 1984–1989 .................................................. 22
1.3. Development of activity-based costing in 1989–1992 .................................................. 34
1.4. Development of activity-based costing after 1992 ........................................................ 38
1.5. Activity-based management .......................................................................................... 42
1.6. Summary and conclusions ............................................................................................. 45
Chapter 2. Modified versions of activity-based costing .......................................................... 49
2.1. Time-driven activity-based costing ............................................................................... 49
2.2. Resource consumption accounting ................................................................................ 55
2.3. TD ABC and RCA compared ........................................................................................ 63
2.4. Summary and conclusions ............................................................................................. 67
Chapter 3. The development of activity-based costing/management journal literature
in Poland 1994–2011 .......................................................................................................... 69
3.1. Introduction ................................................................................................................... 69
3.2. Characteristics of the research method .......................................................................... 71
3.3. The analysis of the research findings ............................................................................. 77
3.3.1. Quantitative characteristics of the publications ..................................................... 77
3.3.2. Characteristics of the authors of the publications .................................................. 78
3.3.3. Research method used in the publication .............................................................. 82
3.3.4. Subject area of the publications ............................................................................. 84
3.4. Summary and conclusions ............................................................................................. 86
Chapter 4. Diffusion and use of activity-based costing in Poland in the light of ques-
tionnaire research ............................................................................................................... 89
4.1. Introduction ................................................................................................................... 89
4.2. Research method ............................................................................................................ 98
4.3. Diffusion of ABC in Poland ........................................................................................ 102
4.3.1. General description of the companies covered by the survey ............................ 102
4.3.2. Characteristics of cost accounting systems used in the companies .................... 103
4.3.3. Analysis of attitudes towards ABC ..................................................................... 104
4.3.4. Contextual factors influencing the implementation of ABC .............................. 112
8
Contents
4.4. Functioning and use of ABC in Poland ....................................................................... 116
4.4.1. General description of the companies covered by the survey ............................ 116
4.4.2. General description of ABC systems.................................................................. 118
4.4.3. Analysis of ABC systems structure .................................................................... 122
4.4.4. Analysis of utilisation of information generated by ABC systems .................... 126
4.5. Summary and conclusions ........................................................................................... 133
Chapter 5. Functioning of activity-based costing in Poland in the light of case studies
and action research .................................................................................................... 139
5.1. Introduction ................................................................................................................. 139
5.2. Research methodology ................................................................................................ 140
5.3. Case studies of activity-based costing implementation ............................................... 146
5.3.1. Activity-based costing implementation in production company ALFA SA ....... 146
5.3.2. Activity-based costing implementation in telecommunication company
BETA SA ............................................................................................................ 150
5.3.3. Activity-based costing implementation in insurance company GAMMA SA ... 155
5.3.4. Activity-based costing implementation in manufacturing and trading company
OMEGA SA – action research............................................................................ 158
5.4. Factors influencing activity-based costing implementation and changes in manage-
ment accounting systems following the implementation ............................................ 162
5.5. Summary and conclusions ........................................................................................... 170
Chapter 6. Satisfaction and benefits of ativity-based costing implementation in Polish
companies........................................................................................................................... 173
6.1. Introduction ................................................................................................................. 173
6.2. Research method .......................................................................................................... 177
6.3. Analysis of the research results ................................................................................... 182
6.3.1. General satisfaction ensuing from ABC implementation ................................... 182
6.3.2. Quality of ABC information with respect to traditional system ......................... 183
6.3.3. Usefulness of ABC information ......................................................................... 184
6.3.4. Influence of ABC on company ........................................................................... 185
6.3.5. Differences in ABC evaluation by preparers and users ...................................... 187
6.4. Summary and conclusions ........................................................................................... 189
Conclusions .............................................................................................................................. 193
Bibliography ............................................................................................................................ 199
List of tables............................................................................................................................. 213
List of figures ........................................................................................................................... 215
INTRODUCTION
At the turn of the eighties and nineties of the 20th century management
accounting was criticized (e.g. Johnson, Kaplan, 1987; Bromwich, Bhimani,
1989; Innes, Mitchell, 1990). The usefulness of methods used from the beginning
of the century was questioned. It was claimed that the methods were inadequate
in terms of changing business environment, which was mainly influenced by
technological development, global competition and development of IT. In
a monograph Relavance Lost Johnson and Kaplan (1987) proved that new times
demanded new methods of management accounting, and these methods included
activity-based costing – ABC.
Activity-based costing emerged in the United States in the late eighties of the
20th century and, subsequently, after a series of articles by Cooper and Kaplan,
spread among companies all over the world. In the nineties, both practitioners
dealing with implementation of ABC and researchers studying the implementations
observed that activity-based costing was something more than just an improved
cost evaluation system. They additionally noted that ABC may be a basis for
activity-based management – ABM. In the late eighties, but also in the nineties of
the 20th century, numerous questionnaire research and research in the form of case
studies (among them action research) were carried out. They aimed to analyze the
process of activity-based costing implementation mainly in the North American
and European countries. Some of the research analyzed factors which influence
activity-based costing implementation. Anderson (1995), Gosselin (1997) and
Krumwiede (1998) studied factors which influence ABC implementation on
different stages of the implementation process. Shields (1995), Swenson (1995),
Foster and Swenson (1997), McGovan and Klammer (1997) as well as Anderson
and Young (1999) analyzed the problem of perception of ABC implementation
satisfaction. Kennedy and Affleck-Graves (2001), Cagwin and Bouwman (2002)
as well as Ittner et al. (2002) studied the influence of activity-based costing on the
company’s performance.
Since the popularization of activity-based costing and activity-based
management in the nineties of the 20th century, the two concepts have been
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Management Accounting Innovations
extremely popular among companies all over the world. However, implementation
of the ABC system proved not to be a simple task. Implementation of activity-based
costing is regarded to be technically complex and it requires adequate human and
financial resources. Research carried out by Innes and Mitchell (2000) proved that
great amount of labour input needed for activity-based costing implementation is
a significant factor on the stage of decision-making about implementation, but it is
additionally one of the five key problems raised by companies in which activity-
based costing functions (remaining problems are: difficulties in collecting data
about resource and activity drivers, necessity to treat costs in the cross-section of
processes going through numerous internal organizational units, other priorities
and great amount of labour from financial section). Numerous research on activity-
based costing proved that information generated in companies by the system
is used in decision-making processes in such areas as pricing, activity-based
budgeting, product and service development, customer profitability analysis and
cost modelling. Research on activity-based costing diffusion in different countries
(e.g. Ask, Ax, 1992; Lukka, Granlund, 1996; Cinquini et al., 1999; Innes, Mitchell,
2000; Bescos et al., 2002; Pierce, 2004) enables to formulate a statement that the
percentage of companies which use ABC varies, however, in most of the research
it is between zero and more than 20 (it should be noted that majority of the
research studied medium-sized and large companies). The differences between
countries in the percentage of companies using activity-based costing stems from
the difference in the development of management accounting methods in those
countries, the way the research sample was selected (large and small companies,
production and non-production companies, financial institutions etc.) but most
of all from the time of collecting information (in general, earlier studies show
significantly lower percentage of companies using ABC).
Due to historical conditions, the development of management accounting in
Poland was less intense and delayed in comparison to the theory and practice in
highly-developed countries1, this trend is also noticeable in the case of activity-
based costing implementation. Polish companies mainly use different traditional
systems of cost accounting, whereas modern systems, including ABC, are used
sporadically. Diffusion of ABC in Poland is lesser than in the United States, Great
Britain or in other highly-developed countries, and despite the fact that the gap
is closing, it still remains significant. The first study which proved that ABC is
present in the practice of Polish companies was carried out by Sobańska and Wnuk
(2000a). Studies conducted by other authors revealed single cases of activity-
based costing or its elements use (Jarugowa, Skowroński, 1994; Szychta, 2001,
1 Modern concepts of management accounting were known in Poland among academics, and
what is more, there were cases of their practical use. However their use in theory and in practice
was significantly lesser than in the western countries (see: Jarugowa, Skowroński, 1994; Sobańska,
Szychta, 1995, 1996; Sobańska, Wnuk, 1999a).
Introduction
11
2002; Karmańska, 2003; Januszewski, Gierusz, 2004; Januszewski, 2005d; Wnuk-
Pel, 2006a; Szychta, 2006a, 2007a), sometimes they signalized that researched
companies were implementing or were considering implementation of ABC
(Dyhdalewicz, 2000, 2001; Szychta, 2001, 2002; Karmańska, 2003; Januszewski,
Gierusz, 2004; Januszewski, 2005d; Szychta, 2006a, 2007a). Some of the hitherto
studies did not notice any single company which used activity-based costing or
was considering its implementation. Yet, it should be stressed that such findings
came mainly from earlier studies (Kinast, 1993; Sobańska, Szychta, 1995, 1996;
Gierusz et al., 1996; Radek, Schwarz, 2000; Szadziewska, 2002, 2003).
A more detailed research on the use of activity-based costing in Polish
practice was carried out by Karmańska (2003), Januszewski and Gierusz (2004),
Januszewski (2005d) and by the author of this work (Wnuk-Pel, 2006b). The
studies analyzed such issues as knowledge of ABC, benefits ensuing from
ABC implementation, problems connected with the process of implementation
anticipated by companies considering implementation and companies which quit
implementation and problems that occurred during implementation.
In Poland, research on activity-based costing implementation in the form of
case study are becoming more frequent (including action research). The pioneer
case studies carried out by means of surveys and interviews were conducted in
2000 (Wnuk, 2000; Kujawski, Ossowski, 2000) and the first action research was
conducted in 2001 (Świderska, Pielaszek, 2001). In the course of time, the number
of such research grew, they especially intensified from 2004 when the number of
companies using or implementing or considering implementation of activity-based
costing systematically increased. Empirical research provided valuable information
on the practice of activity-based costing in Polish companies. The research dealt
with various problems and they mainly embraced the issues of activity-based costing
implementation and the use of information generated by the system.
As far as activity-based costing is concerned, so far questionnaire research
examining both the degree of diffusion as well as the usage of ABC in Polish
companies have been carried out. Case study method (including surveys and
interviews and action research), which is also used in Poland, enables a more
detailed analysis of the problem. Bearing in mind all the research, it can be
concluded that the number of companies using or implementing ABC or
considering its implementation in the future is still growing.
Hitherto research on activity-based costing in Poland was considerably
limited; it mainly came down to a statement whether the analyzed companies
implemented/are implementing ABC in full/classic form or whether they only use
certain elements of ABC. So far, there have been no wide-spectrum research on
functioning of activity-based costing in Polish companies (apart from a few case
studies) nor detailed research on the attitude of companies to activity-based costing
and factors influencing the attitudes. Additionally, there were no research on
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Management Accounting Innovations
activity-based costing implementation success nor analysis of development of literature
about ABC/ABM in Poland. The author’s preoccupation with the issue of activity-based
costing functioning in Polish companies mainly stems from the following:
1) despite the fact that activity-based costing is a concept which has been
known and used in companies since the late eighties of the 20th century, it is not
widely spread and therefore it is still perceived as innovation. Presentation of the
concept’s development may seem interesting;
2) one of the most interesting issues connected with the degree of activity-
based costing diffusion in Poland, which has not been discussed in previous
research, is the analysis of ABC/ABM literature development, in particular
analysis of such issues as volume, authorship, research method, focus, and content
of the publications;
3) so far, questionnaire research which studied diffusion of activity-based
costing in Poland, has not presented in detail the notion of a problem and what
companies considering implementation of ABC understand by a problem. It seems
that sometimes companies use the term ABC inadequately i.e. they use the term in
a situation when a new and better cost accounting system is implemented which
has many cost centres and a bigger, than previously, number of cost drivers. In
such case, only thorough analysis may help to conclude what ABC really stands
for, whether it is the real activity-based costing or maybe just its elements or
whether it is a developed form of traditional cost accounting;
4) another issue, which has not been studied in Poland in a more detailed
form, is the attitude of Polish companies towards activity-based costing and
identification of factors which positively influence implementation of ABC,
as well as reasons underlying quitting implementation or reasons behind not
considering ABC implementation;
5) apart from sporadic case studies (including action research) so far there
have been no research which would look into the way ABC is implemented,
especially the issue of initiative behind implementation or responsibility for
implementation and occurrence of problems during implementation process;
6) ABC systems which function in Polish practice have different structure
than ABC systems in foreign companies. Therefore, it may seem interesting to
analyze the functioning of activity-based costing systems in terms of e.g. their size
(e.g. number of objects, activities, resources, drivers) or information structures
which function in the companies (e.g. division of costs into fixed and variable,
identification of costs of unused capacity, identification of value-added and non-
value added activities);
7) information obtained from activity-based costing may be and is used in
companies in many different ways. Numerous people use it in many different decision-
making processes – therefore, it seems interesting to determine the main addressee of
this information and in what decision-making processes it is mainly used;
Introduction
13
8) another yet interesting aspect of activity-based costing diffusion in Polish
companies is the attempt to evaluate implementation success and benefits ensuing
from the process, particularly analysis of the quality of ABC information, its
usefulness and its influence on the company.
In the light of presented facts, fulfilling the previously identified research gap
i.e. analysis of extent and way of use of activity-based costing in Polish companies
seems important.
The main objective of this work is analysis of development and diffusion of
activity-based costing, as well as evaluation of extent and way of activity-based
costing use in Polish companies. Attaining the main objective will be possible by
achieving the following partial objectives:
1) presentation of activity-based costing concept development as point of
reference for further and detailed research into functioning of activity-based
costing systems in Polish companies;
2) analysis of ABC/ABM literature in Polish journals in the dimension of:
volume, authorship, research method, focus, and content of publications;
3) analysis of ABC implementation extent in Polish companies at the
beginning of the 21st century in the light of ABC diffusion in the world;
4) presentation of factors conditioning the attitude of Polish companies
towards activity-based costing (companies which implemented ABC, those which
consider its implementation in the future and companies which do not consider
implementation or quit the process after cost and benefit analysis);
5) examination of activity-based costing implementation process in Polish
companies, examination of ABC systems structure and way the information
generated by the systems is used;
6) analysis of the satisfaction and benefits ensuing from ABC implementation
in Polish companies, particularly analysis of the attitudes of preparers and users of
ABC information, and also the quality of ABC information, its usefulness and its
influence on the company.
In order to attain the main objective of this work as well as its partial
objectives, it has been attempted to prove the main thesis and the following specific
theses. The main research thesis sounds: diffusion of activity-based costing in
Polish companies, although delayed in comparison to highly-developed countries’
practice, is conditioned by the same factors and develops in the same direction as
in those countries.
In order to prove the main thesis and, additionally, to prove specific theses as
well as to verify specific hypotheses, the following research methods have been
applied: literature study, surveys, case study (including action research).
1. In terms of literature study, both Polish literature and foreign publications
have been analyzed. Such extensive literature studies enabled the author to
formulate own findings and to compare the findings with other research carried
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Management Accounting Innovations
out in Poland and other countries. On the basis of literature study, it has been
attempted to prove the following specific theses of the work:
a) the concept of activity-based costing, since its emergence in the late eighties
of the 20th century, has evolved from the measurement system of resource costs,
activity costs and cost of products into the activity-based management system;
b) the development of ABC/M literature in Poland is considerably delayed
(by 6–8 years) in comparison to the publications from the United States, Great
Britain and other highly-developed countries;
c) there are more publications on the ABC/M concept in the journals
for practitioners than in the university publications, and the authors of those
publications are mainly university researchers;
d) the percentage of the ABC/M enthusiasts among consultants is close to the
highest possible level, yet the ratio among practitioners and university researchers
is only slightly lower;
e) among research methods used in the publications, it is more common to
encounter descriptive works, surveys and case studies than literature reviews and
analytical papers;
f) the subject area of the publications evolved from the activity-based
costing in production companies and only in the main area of activity, into ABM
in production and service companies in the main and supporting processes with
reference to other concepts and tools of management accounting.
2. In order to attain the main objective of this work, three surveys have been carried
out. The first survey (survey A) examined the attitude of Polish companies towards the
notion of activity-based costing. The surveys were distributed among representatives
of 1267 companies; 495 correct surveys were sent back which constitutes 39.1 . The
second survey (survey B) analyzed the way activity-based costing operated in Polish
companies. In general, 71 companies which used this type of cost accounting system
have been identified; 33 correct surveys were sent back which constitutes 46.48 .
The third survey (survey C) examined satisfaction and benefits ensuing from activity-
based costing implementation. This survey was carried out among 28 respondents
from 7 companies where activity-based costing was used. On the basis of conducted
surveys, the following specific hypotheses have been verified:
a) companies operating in Poland mostly use traditional systems of cost
accounting; modern systems such as target costing or activity-based costing are used
sporadically and their diffusion is significantly lesser than in Western countries;
b) implementation of activity-based costing is influenced by various factors; the
most important are: headquarters’ demand (e.g. parent company), rise of competition
and the drive to expand into new sales markets, dissatisfaction with the previous cost
accounting, change of organizational structure or strategy, implementation of new
technologies, desire to reduce costs and improve results, change-oriented attitude of
employees, accessibility of financial and human resources;
Introduction
15
c) among the most important problems related to the process of activity-
based costing, which companies are afraid of, one could mention: lack of
management support, high implementation and maintenance costs, significant
labour input during ABC implementation and maintenance, other priorities,
insufficient knowledge of ABC, difficulties with system structuring, lack of
adequate resources;
d) lack of interest in implementation of activity-based costing or resignation
from ABC implementation are conditioned by: satisfaction with current cost
accounting system, low indirect costs, lack of management support, high costs
of ABC implementation and maintenance, high labour input during ABC
implementation and maintenance, other priorities, insufficient knowledge of ABC
among employees, difficulties with system modelling, lack of adequate IT resources;
e) the most important factors which positively influence ABC implementation
are: high direct costs, high competition, foreign capital share in the company and
size of the company;
f) the structure of activity-based costing systems which function in Polish
companies is consistent with the structure of systems functioning in foreign
companies;
g) in companies, which implemented activity-based costing, information
obtained from the system is used in different ways by particular departments and
it enables making various decisions;
h) companies, in which activity-based costing operates, simultaneously use
other modern methods of management;
i) managers and employees are positively oriented
towards ABC
j) managers and employees rank the information from ABC higher than from
the traditional cost accounting system;
k) managers and employees evaluate positively the usefulness of the ABC
implementation;
information;
l) managers and employees are convinced that ABC implementation
influenced their company in a positive way;
m) opinions of preparers and users of ABC information on implementation
benefits will differ considerably.
3. Research in the form of case study (including action research) aimed to
verify the same hypotheses, which were verified by means of survey B, however the
case study research, in comparison to the questionnaire research, was extended and
more detailed. Another reason underlying the application of this type of research
method was the analysis and explanation of methodological and organizational
changes which occurred after activity-based costing implementation in the
analyzed companies. Representatives of three companies, to which case study
method by means of surveys and interviews was applied, were asked to fill in
16
Management Accounting Innovations
surveys A and B. Subsequently, numerous direct interviews with employees and
managers were conducted. Then the author analyzed gathered information and
that enabled him to gain in-depth knowledge about conditioning of design and
implementation of activity-based costing in Polish companies. By action research
the author means his participation in the design, implementation and evaluation of
activity-based costing in a production and trading company. This kind of research
enabled (in comparison to case study by means of surveys and interviews)
a more detailed analysis of activity-based costing operation in the company:
(a) the author cooperated for a few months with company’s employees at the stage
of implementation, and later he also cooperated at the stage of ABC evaluation,
(b) the author co-developed the ABC system, therefore he had unlimited access to
the system’s documentation, (c) the author had access to all information generated
by the cost accounting system and he could observe how the information was used
by the company’s management. Based on the case study, the following specific
hypotheses have been verified:
c) the process of activity-based costing implementation is positively
influenced by three groups of factors: motivators, catalysts and facilitators; during
the implementation process, the factors work jointly and they promote the process
of change;
d) among obstructors, factors which negatively influence activity-based
costing implementation, one should mention: attitude not favouring changes,
substantial labour input needed for implementation and insufficient knowledge of
activity-based costing;
e) implementation of activity-based costing in the companies caused many
methodological changes, especially improvement in accuracy of calculating
indirect costs and improvement in accuracy of profitability analyzes;
f) implementation of activity-based costing
institutional/
organizational changes in the company, especially nearing the function of
management accounting to operational functions and improvement in the
significance of information from the management accounting and its more
frequent use especially in the decision-making process.
triggered
4. Additionally, apart from the above research methods, a comparative
analysis of the author’s own research in the form of surveys and case studies
(including action research) with similar research conducted both in Poland and in
the world has been carried out.
It needs to be highlighted that the author is aware of the fact that the findings
of empirical research should be interpreted with great caution. Particularly, due
to sample choice, they cannot be treated as research on activity-based costing in
all the companies operating in Poland. Although in the questionnaire research,
the sample was large, it was not representative; in case studies, the choice of
companies was deliberate. According to the author, these limitations were partially
Introduction
17
reduced due to triangulation of various research methods and comparison of own
findings with research conducted by other authors.
This work is an outcome of a-few-years long literature studies and empirical
research carried out by means of questionnaires and case studies. It is also
a product of author’s own cogitation resulting from cooperation with professor
Alicja Jaruga, who was author’s doctoral thesis supervisor, and cooperation with
professor Irena Sobańska, with whom the author collaborates both on professional
and academic level – therefore I would like to thank Them and express my great
gratitude for Their support. Moreover, I would like to thank my all Colleagues
from the Accounting Department of Łódź University and hundreds of respondents,
who participated in the research.
I owe special thanks to Karolina Pel for her invaluable help with translation
of the book.
CHAPTER 1
ORIGIN AND DEVELOPMENT OF ACTIVITY-BASED
COSTING
1.1. Precursors of activity-based costing
The earliest traces of activity-based concept may be found in the works
of Schmalenbach, who already in 1899 indicated a possibility of isolating cost
of processes and calculating them for products (Szychta, 2007a). Some pioneer
studies on activity accounting appeared in the thirties of the 20th century and in
Kohler’s works, who worked out guidelines for activity accounting concept and
put them into practice in Tennessee Valley Authority (the United States). Kohler
assumed that all costs, including depreciation costs, should be allocated to people
responsible for transactions (activities) taking place in the company. Each manager
was in charge of an activity account where all incomes, costs and profits were
allocated and which the person controlled.
Drury stresses that ABC is not an ‘invention’ of the eighties of the 20th century
and that its origins date back to the late forties in Goetz’s works (1949, p. 142,
[in:] Drury, 2000, p. 340), who introduced principles of accounting based on
activities, “Each basic (indirect costs) class should be homogenous in terms of
every significant dimension of a management problem related to planning and
control. Some of those significant dimensions, along with which (overheads) may
change, are number of production units, number of orders, number of operations,
company’s capacity, number of provided catalogue items”.
Horngren sees the origins of ABC concept in the fifties of the 20th century.
According to him ([in:] Robinson, 1990, p. 23), a form of activity-based costing
called functional cost accounting may be already found in a work entitled
Practical Distributions Cost Analysis by Longman and Schiff from 1955.
In Kaplan’s opinion, who referred to Horngren’s viewpoint, “it is not important
who wrote the articles a few dozen years ago. The articles must have been
20
Management Accounting Innovations
extremely unconvincing or our teaching must have been very ineffective, since
the articles had little influence on the practice. Our works are not based on articles
or books but on systems which function in practice” ([in:] Robinson, 1990, p. 29).
Johnson (1991) sees the origins of practice, similar to activity-based costing,
in the cost accounting which functioned in the sixties of the 20th century in General
Electric. In this system, different indirect production activities were assigned to
departments (technological, quality control etc.) and it was analyzed how the work
of one department influenced the work of other departments. The number of units
of performed activities, costs of those activities and cost rates per unit of activity
were also defined. In the course of time, cost accounting in General Electric was
developed and improved; it included creation of list of standard activities (activity
dictionary) or improvement in gathering data about activities.
The drive to take the structure of processes into consideration was also
evident in cost accounting systems of German companies. Jaruga (2001) mentions
Böhrs (1968) and his attitude to grouping indirect costs as one of the pioneers of
activity-based costing. Böhrs perceived costs through the prism of certain range
of activities seen as elementary functions (Jaruga names the concept as functional
cost accounting). Böhrs’s concept claims that in order to meet the company’s
objective it is necessary to use its potential in the most optimal way. To do that, it is
essential to differentiate company’s functions and work out accounting procedures
which would be in compliance with the activities performed within these activity
functions. In the functional cost accounting system three groups of functions have
been distinguished (each function has a particular range of activities):
• direct functions: a function coordinated with the degree of used capacity,
material supply, servicing of production orders, development, expanding sales
market, servicing of consumers, company management;
• indirect functions necessary to perform direct functions: management and
administration of personnel, preparation of new workplaces, supply with energy
sources;
• indirect functions – services: improvement of work process, maintaining
technical equipment on stand-by, information services, legal advice, administration
services, transport and storing.
In Böhrs’s concept, in order to calculate costs of product, first costs of indirect
functions to the benefit of direct functions should be calculated and then one should
calculate costs of direct functions for products1. According to Jaruga (2001, p.108),
“Böhrs’s concept dating back to the late sixties constitutes a pioneer solution with
1 In Böhrs’s concept eight blocks of costs of direct functions have been distinguished: „(a)
costs of raw materials, (b) production costs for particular level of production capacity time use,
(c) company’s stand-by costs, (d) costs of product research and product development, (e) costs of
raised production volume (additional orders), (f) costs of advertising and marketing, (g) costs of
customer service, (h) costs of management” (Jaruga, 2001, p. 108).
1. Origin and development of ABC
21
relation to later variations and modifications called concepts based on activities.
It is evident that it helps to control costs of used capacity of particular functions
(activities), it takes into account the significance of cost measurement of different
orders (the size of order) which employ only some of the functions. Therefore, it
fosters accommodation of information to decisions taking place in the changing
conditions of the environment (market)”.
Johnson sees the origins of activity-based costing system in Staubus’s (1971)
works, who emphasized the significance of activities in cost accounting2. It was
Staubus’s idea to have accounts for each function, operation, task or process, which
provided information required by management of the company. In Staubus’s activity
costing, activities and not products constitute cost accounting objects (production
process constitutes a cost object and not a product itself). According to Johnson
(1992, p. 27), the concept of activities advocated by Staubus and Shilinglaw “has
not had any influence on academic thought (until recently) and it seems that it also
did not influence the development of activity-based costing in practice”.
Johnson (1992) looks for some pioneering solutions in terms of activity-
based costing in the achievements of two consulting companies Bain Co. and
Boston Consulting Group (BCG) in the seventies and eighties of the 20th century.
This opinion is also shared by Kaplan, who thinks that Bain Co. and BCG have
in-depth knowledge about cost accounting.
In Polish literature the concept of costs of production factors worked out by
Skowroński (Jarugowa, Skowroński, 1982) is also known; the concept heads in the
same direction as the later concept of activity-based costing. Skowroński’s concept
aims to rationalize administration of limited resources and it takes elimination of
constraints characteristic of full costing and disadvantages of variable costing as
a starting point. Instead of dividing costs into direct and indirect ones and treating
fixed costs as a time function, the concept of production factor costs assumes
that common product costs may be individual unit costs of reference, which are
expression of important, for the process of planning and control, production factors
in three stages: acquisition and possession, maintenance on stand-by, exploitation
with different intensity. As production factor, a set of activities related to securing
possession, maintenance on stand-by and exploitation of a certain group of resources
which determine production (e.g. management of work resources, management of
work tools, management of materials, management of energy, sales) is meant here.
In Skowroński’s concept (Jarugowa, Skowroński, 1982) the emphasis was put onto
effective use of resources whereas relation to the environment (market) was ignored.
This concept enables then to acquire information which is significant in making
decisions about the change of production scale, expansion of resources or their more
intensive use, influence on the readiness of capacity or efficiency of resources.
2 The idea of activity accounting was also analyzed, in terms of standard cost accounting
system, by Solomons (1968, [in:] Innes, Mitchell, 1998, p. 1).
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