ABC 3 - THE ACTIVITY-BASED COSTING METHOD : DEVELOPMENTS...

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1 THE ACTIVITY-BASED COSTING METHOD : DEVELOPMENTS AND APPLICATIONS The IUP Journal of Accounting Research and Audit Practices, Vol. VIII, n° 1, p. 7-22. Gregory Wegmann, Associate Professor Department of Business Administration, University of Burgundy (France) LEG, UMR CNRS 5118 Correspondance: Gregory Wegmann University of Burgundy, UMR CNRS 5118, Pôle d’Economie et de Gestion, 2, bd Gabriel, 21 680 Dijon Cedex, BP 26611, France Tel: +33 (0)3 80 39 52 77 Fax: +33 (0)3 80 39 54 88 E-mail: Gregory.Wegmann@u-bourgogne.fr Abstract: This paper analyses the management accounting applications which try to improve the Activity-based Costing method. In the first part, we describe them using the Strategic Management Accounting stream. Then, we present the main features of these applications. In the second part, we examine in details two of these features: The widening of the analysis perimeter and the relevant level of details to analyse the costs. Then, we analyse several proposals: Customer Profitability Analysis (CPA), Interorganizational Cost Management (IOCM), Resource Consumption Accounting (RCA) and Time-driven ABC (TDABC). Finally, we describe an experience observed in the IT supply European division of an international group. This group experiments what we call at the end a supply chain ABC tool to manage its interorganizational relations. Key words: Activity-based Costing, Strategic Management Accounting, Time-driven ABC, Case study.
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2 The Activity-based Costing (now ABC) method is the most well known management accounting innovation of the last twenty years. Since the early stages of the method, the Anglo-Saxon scholars have tried to develop specific applications and extensions. In France, the ABC method and its main managerial development, Activity-based Management (ABM) are quite famous 1 . But the numerous developments based on the ABC method are not very well known and nor discussed. This is our research project. The ABC method was designed in the United-States during the 80’s (Cooper and Kaplan, 1988) 2 . It is a refined cost system which enables classifying more costs as direct, to expend the number of indirect-cost pools and to identify cost drivers. ABC favours better cost allocation using smaller cost pools called activities. Using cost drivers, the costs of these activities are the basis for assigning costs to other cost objects such as products or services. Since the work of Johnson and Kaplan (1987) on the “Relevance Lost” of Management Accounting, the Anglo-Saxon scholars have been very dynamic. The majority of management accounting developments are based on the Strategic Management Accounting stream 3 . With the historical research of Johnson and Kaplan, we understand the context from which ABC arose. Looking for management accounting methods which could clarify the decision making process, Johnson and Kaplan suggest: First, to analyse more deeply the organization activities and processes and second, to link together the strategic and the operational management. These proposals announce the development of the Balanced Scorecard (Kaplan and Norton, 1996) and of a strategically oriented ABC.
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ABC 3 - THE ACTIVITY-BASED COSTING METHOD : DEVELOPMENTS...

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