CHAPTER NINEUnderstanding ABC/M: A Few Basic Truths

IN PART FIVE, BEGINNING with this chapter, the full spectrum of management accounting will be discussed not only for measuring past period costs but also the forward-looking future view of budgeting and “what-if” tradeoff analysis. Chapter 14 will describe a practical approach to implement a progressive, repeatable, and reliable production management accounting system in a few weeks, not months. This is intended to dispel the notion that the extra benefits from the extra effort to implement a progressive management accounting system is not cost-justified. But by reducing the effort relative to the benefits, it can make sense to proceed.


At the federal level in the United States, the President's Management Agenda, Office of Management and Budget (OMB), the Government Accountability Office (GAO), and Congress are demanding transparency and accountability of effectiveness of government programs. Federal agencies are required to assess and determine performance. And funding will increasingly be determined according to demonstrated results.

The purpose is to improve performance and program management by creating a focus on results. Ineffective programs are being reformed or constrained, or are facing closure. Programs deemed ineffective or with questionable results are losing budget funding and face poor publicity. Agencies find themselves defending program missions ...

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