The 123s of ABC in SAP

1COST MANAGEMENT: A BRIEF HISTORY AND THE CONVERGENCE OF PHILOSOPHIES

Since the mid-1980s, the business community in the United States has been challenging the value of management accounting data as a support tool to business decision making. The conclusion: Management accounting as it has existed since the industrial revolution is no longer sufficient in the new more complex business world. Early management accounting served the community well for a long time. As long as the primary costs in an organization could be accurately traced to products with labor hours, or perhaps machine time, management accounting had fine tools in place. As soon as this paradigm in the cost structure changed, so did the quality of cost information. In the current marketplace, the simplistic standard cost flow has become obsolete and has been replaced with the need for more comprehensive and meaningful information.

NEED FOR CHANGE

This story has been told in countless articles and books; customers want choice, in terms of services and product permutations. These choices drive complexity and complexity drives overhead, which, in turn, negatively impacts the ability of traditional managerial accounting to satisfy managerial information needs. Combine these issues with the rise of automation and the e-marketplace, and the dilemma of the accounting world is apparent. Certainly in the future complexity will only increase. The authors of the book Blur: The Speed of Change in the Connected Economy stated, ...