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Journal of Management
Accounting Research
1995, Volume 7
Contents
A Framework for Assessing Cost Management System Changes: The Case of Activity Based Costing Implementation at General Motors, 1986-1993
Shannon W. Anderson
University of Michigan
Abstract: An opportunity to study the technical and organizational impact of management accounting system changes has emerged with companies' adoption of activity based costing (ABC). This paper provides a structured account of experimentation with, and adoption and adaptation of ABC in General Motors Corporation, from 1986 to 1993. From this case, the paper develops a framework for evaluating ABC implementation and hypotheses about factors that influence implementation. The search for factors that influence ABC implementation success is guided by the information technology and organizational change literatures, as well as anecdotal evidence of factors that influence ABC implementation success. Data is gathered from interviews, archival records, and direct observation and the primary method of analysis is with-in case comparison of data sources. The theory of ABC implementation that emerges is one of an evolutionary sequence of implementation stages that are influenced by sociotechnical factors.
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The LIFO/FIFO Choice as a Signal of Future Costs
Sasson Bar-Yosef
Hebrew University
Patricia J. Hughes
University of California, Los Angeles
Itzhak Venezia
Hebrew University and University of California, Los Angeles
Abstract: We provide an additional explanation for the widespread use of FIFO during periods of rising costs with a model in which firms use the proportion of inventory valued by FIFO to signal their low production costs. We show that the more efficient firms with lower rates of change in cost forego fewer tax savings by using FIFO as compared to the LIFO method. We extend previous work by Hughes and Schwartz (1988) through providing a signaling model that is more general in terms of the firms it applies to, yet is also more specific at linking the signal and the source of information asymmetry. The model also relies on the reactive equilibrium concept which has a broader intuitive appeal than the equilibrium concept employed by Hughes and Schwarts.
The results of the paper are consistent with the empirical findings of Brown (1980), Ricks (1982), and the more recent results by Hand (1993) and Hughes and Trezevant (1995) that the switch from FIFO to LIFO conveys bad news. The paper also provides the following empirical hypotheses: the production of inventory assigned to LIFO should be increasing in the growth of costs, decreasing in the weight placed on the market inference of the firm's value, increasing in the tax rate, and increasing in the discount rate.
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A Framework for Classifying and Evaluating the Theoretical Contributions of Case Research in Management Accounting
Patrick J. Keating
San Jose State University
Abstract: General agreement does not exist about what information must be included in a case research paper. There are no established conventions for addressing the basic question, what have we learned about management accounting from this case study? This paper presents a framework that: 1) captures the diversity of research scope covered in management accounting case studies, and 2) provides a straightforward framework for "taking stock" of those aspects of theoretical contribution that researchers have or have not addressed in their research. What we should expect to learn form individual case studies will vary with the theoretical objectives of each study. Thus, the framework presented here uses stage of theory development as the criterion for classifying case studies. Within each stage of theory development, typical objectives and research outputs are identified. The framework is illustrated using eight management accounting case studies. The value and limitations of the framework is discussed.
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A Search Process for Multiple-Objective Management Accounting Problems: A Budget Illustration
Robert A. Leitch
University of South Carolina
Ralph E. Steuer
University of Georgia
James T. Godfrey
George Mason University
Abstract: Management accounting multiple-objective decisions may be complex due to numerous objectives and constraints and the optimization criteria are often ill-defined. We illustrate these difficulties by describing typical complex management accounting problems and compare leading multiple criteria decision models to identify one that best matches the solution requirements of these problems. We conclude that the Combined Tchebycheff / Aspiration Criterion Vector Procedure is the preferable method. It uses a mathematical model to analyze management's criterion domain of objectives, which is much smaller than the task domain. Its an iterative procedure that makes multiple probes of neighborhoods of decreasing size in a nondominated criterion set. This enables the decision maker to learn about the feasibility of achieving objectives in a specific environment. The decision maker either selects a final solution or continues to search for a better solution in the neighborhood of either the "best" solution so far or an aspiration vector.
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Fairness as an Antecedent to Participative Budgeting: Examining the Effects of Distributive Justice, Procedural Justice and Referent Cognitions on Satisfaction and Performance
Tim. M Lindquist
The University of Northern Iowa
Abstract: Previous research has suggested that more participation (high process-control) in decision-making is always preferable to less (low process-control). Some research, however, has stated that any level of participation less than full decision-control is pseudo-participation. Often, no control is seen as desirable over solely process-control.
This paper tests theories of distributive justice, procedural justice and referent cognitions in a laboratory experiment. It finds one form of process-control is a viable form of participation. Subjects allowed only a voice (low process-control) in setting budgets, experienced greater budget and task satisfaction than subjects allowed no input. This effect occurs even when unattainable (unfair) budgets are received. No effect is found on performance.
Further, this research finds that high process-control (vote for standard) is effective only when attainable (fair) budgets are achieved. When unattainable (unfair) budgets are received, subjects with a vote (high process-control) experience less task and budget satisfaction than individuals with only a voice (low process-control). Subjects with high process-control (vote) form referent cognitions (i.e., more definite impressions of what their budgets will be). Subjects in the voice (low process-control) conditions do not form these referent cognitions. Thus, subjects in the vote conditions form stronger feelings of dissatisfaction when unattainable (unfair) budgets are received.
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An Empirical Analysis of Firm's Implementation Experiences with Activity-Based Costing
Michael D. Shields
University of Memphis
Abstract: This paper provides exploratory empirical evidence on 143 firms' degree of success with ABC and on implementation variables that are associated with ABC success. There are four primary results. First, there is considerable variation in the degree of success firms have with ABC. Second, several behavioral and organizational variables are important to explaining cross-sectional variation in ABC success, particularly top management support, link to competitive strategies, link to performance evaluation and compensation, training, ownership by nonaccountants, and adequate resources. Third, these implementation variables are used in patterns that can be interpreted as behavioral and organizational implementation strategies. Fourth, ABC success is not significantly associated with the use of four technical implementation variables, specifically canned software, custom software, external consultants, and stand-alone vs. integrated system. Finally, this paper offers several suggestions for future research.
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The Benefits of Activity-Based Cost Management to the Manufacturing Industry
Dan Swenson
University of Idaho
Abstract: This study measured financial and operating managers' satisfaction with activity-based costing (ABC) at a variety of manufacturing firms. It also evaluated the use of ABC information to support decision making. The findings are based on the results of ten field visits and 50 telephone interviews of 25 manufacturing firms that use ABC. The interviewees reported significant improvement in their cost management systems following the implementation of ABC. Evidence is also provided about how managers actually used the ABC information to support strategic and operating decisions.
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