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Back to Norms: Can Activity-Based Costing be the right answer to the ‘appropriate’ question?

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journal contribution
posted on 03.08.2020, 09:03 by Sarah Mohamed
In 2006, Johnson published his famous paper; “lean accounting: to become lean shed accounting”. The paper explained the logics behind a lean management system and how traditional accounting practices, especially costing ones, such as standard costing and activity-based costing(ABC)fail to fit an operation and management system built around lean principles.Johnson (2006) discussed how ABC can be the right answer to the wrong the question, identifying that a question of cost and/ resource allocation would not normally be correct for lean firms focusing on operations ’flow. As much as the paper was right on how some costing practices,for example standard costing, comes in contrast to some of the main of objectives of a lean management system, the paper tends to presume an almost standardized way in which organisations approach lean management implementation, including how operation flow is managed and how value streams are identified. This paper seeks to understand different patterns in which organisations manage the flow of their operations, identify their value stream/sand how this is then reflected on the type of demand/ questions they have regarding their costing needs. Based on this understanding,the paper suggests that ABC can sometimes become the right answer to an ‘appropriate’ question which we have not yet explored. An ‘appropriate’question that is mainly driven by lean organisations’specific needs and the pattern in which they have structured and managed their lean management implementation. The paper sets a framework which succeeds to integrate Activity-Based Costing in one of the factories of a Swiss multinational organisation manufacturing power components.The suggested ABC framework is used to compute organisation’s product costs and make other decisions on its value adding and non-value activities. The paper responds to various calls to conduct context driven management accounting research and in-depth case studies which explores different management accounting practices to work with lean management. Findings of the paper contributes to both management accounting and lean management literature through explaining how ABC can still have an influential role in lean firms, especially when other lean accounting costing practices –such as value stream costing –cannot suffice organisations’needs

History

Citation

Journal of Accounting and Organisational Change, in press, 2020

Author affiliation

School of Business

Version

AM (Accepted Manuscript)

Published in

Journal of Accounting and Organisational Change

Publisher

Emerald

issn

1832-5912

Copyright date

2020

Publisher DOI

Language

en

Publisher version

https://www.emerald.com/insight/publication/issn/1832-5912