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Journal of Management
Accounting Research
1991, Volume 3
Contents
Restoring the Relevance of Management Accounting
Toshiro Hiromoto
Hitotsubashi University
Abstract: In our internationally competitive business environment, the path to take to restore the relevance of management accounting is sought by many. This article is based on the author's intensive field studies at successful Japanese manufacturing firms in several major industries, including automobiles, semiconductors, and consumer electronics. Four case descriptions are included. Today's innovative management accounting systems are designed to support continuous innovation, which is a new common theme of management accounting systems design. The four elements of the new theme are: A Behavior Influencing Focus, Market-Driven Management and A Dynamic and Team-Oriented Approach. In the past, management accounting has tended to focus on optimization with respect to a given set of parameters. Today's manufacturers, however, need a new system that would promote strategic management and focus on motivating employees to act strategically.
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Target Costing and Kaizen Costing in Japanese Automobile Companies
Yasuhiro Monden
University of Tsukuba
Kazuki Hamada
Seinan Gakuin University
Abstract: Cost management methods used by a company must be useful for the production of new products which meet the customers' demand at lowest cost as well as an aid to cost reduction of existing products by eliminating wastes. To achieve this, companies need a total cost management system which includes target costing and Kaizen costing.
The purpose of this paper is to explain features of the system of total cost management in Japanese automobile companies. This paper thus consists of two pillars (i) "Target costing," the system to support the cost reduction process in the developing and designing phase of a new model; and (ii) "Kaizen costing," the system to support the cost reduction process in the manufacturing phase of existing products. We would also like to emphasize that the management accounting system is functioning very well through target costing and Kaizen costing in Japanese automobile companies.
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Data Envelopment Analysis: Partial Survey and Applications for Management Accounting
Jeffrey L. Callen
The Hebrew University of Jerusalem
Abstract: Controlling cost in the organization is an essential element of the managerial accounting function. One important factor for controlling costs is the ability to measure the ex post efficiency performance of the firm (or department) either over time or by comparison to other firms (departments) in the industry. Data Envelopment Analysis (DEA) is a practical yet theoretically powerful tool for measuring ex-post efficiency performance. Moreover, since the application of DEA requires only physical input-output data - market prices are irrelevant - it is applicable to not-for-profit as well as profit-seeking organizations.
This paper provides an intuitive description of the DEA methodology and shows how DEA is related to neo-classical production theory. DEA is then applied to an example in order to illustrate the simplicity of application. The DEA literature is partially surveyed and potential applications to management accounting emphasized. The strengths and weaknesses of DEA are analyzed.
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Performance Evaluation and the Analytic Hierarchy Process
Yee-Ching Lilian Chan
McMaster University
Bernadette Eleanor Lynn
McMaster University
Abstract: Conventional accounting techniques that treat the organizational world as static and unidimensional may be inadequate in evaluating performance in the modern complex organization. Past studies have focused on the problems with return on investment and residual income and have advocated various forms of multiple non-accounting measures without offering a means of reconciling these disparate evaluative yardsticks into a single performance measure. This paper first reviews the need for multiple performance criteria to measure long-run profitability and then provides a model (the Analytic Hierarchy Process) for developing an overall effectiveness measure in a multiple measure environment which is applied to a detailed hypothetical example. The analytic hierarchy process offers a systematic means to weight multiple measures, using a participative process that can enhance internalization of organizational goals. The analytic hierarchy process thus gives management accountants a means for reducing the subjectivity of current weighting schemes and improving performance evaluation of both organizational segments and their managers.
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Some Empirical Evidence on the Non-Normality of Cost Variances
Donald W. Gribbin
Southern Illinois University at Carbondale
Amy Hing-Ling Lau
Oklahoma State University
Abstract: Cost variance data was collected from 14 production departments of a medium size manufacturing plant belonging to a Fortune 500 company. The data consists of weekly standard direct labor costs and direct labor efficiency variances in 1985 and 1986. For each of the 14 departments, we tested whether the following two types of variances are normally distributed: the direct labor efficiency dollar variances and the direct labor efficiency percentage variances. Various tests of normality were considered, and the two most powerful ones (the Bowman-Shenton K2s and Shapiro-Wilk W tests) were used. For the direct labor efficiency dollar variances, only seven out of the 14 departments can be considered to have normally distributed data. For the direct labor efficiency percentage variances, only one out of the 14 departments can be considered to have normally distributed data. Our results indicate that one should not simply assume normally distributed variances indiscriminately.
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An Empirical Examination of Managers' Motivation to Implement Just-in-Time Procedures
Lynn Griffin
North Carolina A and T State University
Adrian Harrell
University of South Carolina
Abstract: Implementing the Just-in-Time concept results in major physical, psychological and organizational changes in a firm's work environment. The organizational slack which cushions production from problems caused by defective raw materials, irregular supply and demand schedules and production errors is eliminated. Changes in the manufacturing process may require substantial changes in the firm's overhead allocation and application procedures, inventory control procedures and the treatment of direct labor. As a result, many members of a firm may be reluctant to actively support Just-in-Time implementation.
A greater understanding of motivational issues associated with implementing such new procedures has both theoretical and practical utility. For example, the identification of appropriate theoretical models will facilitate future research in this area by accounting academics. A practical benefit is that management accountants may be able to better advise senior executives regarding appropriate incentives for motivating the firm's members to support implementation. It is proposed that expectancy theory provides appropriate conceptual models for understanding these issues. The results of our study provide empirical support for both the valence and force models. Theoretical and practical implications of the findings for the implementation of new procedures and systems are discussed, along with recommendations for further research.
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Capital Budgeting Practices - A Survey of Corporate Use
Thomas Klammer
Bruce Koch
Neil Wilner
All of University of North Texas
Abstract: This paper provides a tabular and descriptive comparison of the usage of various capital budgeting techniques over several time periods and surveys. Responses to a new questionnaire are found to be generally consistent with prior study results. The usage of sophisticated capital budgeting techniques continues to expand, but a wide variety of methods and approaches are used. There are substantial variations in the project evaluation techniques used for different categories of capital expenditures. The use of formal risk analysis techniques also appears to be expanding. A discriminant analysis found that the usage of these techniques is related to selected firm size and performance measures: total assets, capital expenditures, income before extraordinary items/total assets, and operating cash flows/total assets.
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Management Accounting and Control Systems: A Structuration Theory Analysis
Norman B. Macintosh
Queen's University
Robert W. Scapens
University of Manchester
Abstract: This article evaluates the potential of Giddens' structuration theory as a way to extend the theoretical domain of management accounting research into the realm of social theory. The article outlines structuration theory, relates it to management accounting systems, and uses it to interpret two longitudinal empirical studies of management accounting systems - the new financial control system at General Motors during Alfred Sloan's early years as CEO and the weapons repair uniform cost accounting system initiated by Robert McNamara at the Department of Defense. The article concludes that a structuration theory approach sensitizes research and theory building to the role management accounting systems play in producing and reproducing meaning, power, and morality in organizations, provides a framework for understanding the role these systems can play in organizational change, and offers advantages over "either/or" types of accounting conceptual frameworks.
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Conditions Under Which Activity-Based Cost Systems Provide Relevant Costs
Eric Noreen
University of Washington and INSEAD
Abstract: Activity-Based Cost systems assign costs to products on the basis of multiple "cost drivers," which may or may not be proportional to the volume of output. This is in contrast to most traditional cost systems which use only one allocation basis (usually direct labor or machine hours) that is proportional to volume. Commonly cited reasons for switching to Activity-Based Cost systems are to more accurately estimate product profitability for purposes of making product pricing and drop decisions and to reduce the cost of manufacturing products in the design stage by providing more accurate cost information concerning alternative design specifications. In this paper the conditions under which an Activity-Based Cost system would provide relevant information for just such decisions are derived. These conditions are quite stringent and include, among other things, that all costs must be strictly proportional to their "cost drivers."
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Accounting Evaluative Styles and the Contagion Effect in Middle-Managers: An Empirical Study
C. Douglas Poe
University of Kentucky
Winston T. Shearon, Jr.
Texas A&M University
Robert H. Strawser
Texas A&M University
Abstract: This paper reports an investigation of the effects of managers' perceptions of the style used by superiors to evaluate their performance on their own personal evaluative styles when accounting information is included in the evaluation process. A situation rating questionnaire, rather than simpler self-reports, was used to determine the evaluative style of managers. A sample of 77 middle-managers representing 25 companies at 46 separate plants or locations was used in this study. Reinforcement or alteration of managerial styles and the styles which exert the stronger contagion effects were also considered.
The findings indicate that the contagion effect for use of accounting information is very strong whenever middle-managers are certain of their evaluative environments. Evidence of a gradient of reliance by managers on their perceptions of evaluative environments is also presented and discussed. It was noted that traditional methods developed by Hopwood to classify evaluative environment appeared to result in misclassification of managers functioning budget conscious or profit conscious environments, perhaps due to effects of uncertainty of their perceptions of evaluative environments. This is congruent with prior findings that environmental uncertainty affects the use of accounting measures in performance evaluations. Further, induced changes in evaluative style were noted, irrespective of the prior environment of managers. No particular evaluative style was found to be more or less easily affected.
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Factors Influencing Supervisor's Responses to Subordinate's Poor Performance: An Attributional Analysis
Vajana Tongtharadol
University of Wisconsin at Eau Claire
J. Hal Reneau
Arizona State University
Stephen G. West
Arizona State University
Abstract: Previous research in accounting and other disciplines has indicated the importance of causal attributions in the interpretation of performance variances. However, most accounting research ahs focused on antecedents rather than consequences of attributions. This study focuses on consequences of attributions by examining the relationship between causal attributions and subsequent responses in a performance evaluation context. Specifically, the study examines the effects of two dimensions of causal attribution: locus of causality and stability, as well as a potential moderating variable, organizational responsibility, on supervisors' responses to a subordinate's poor performance.
A field experiment was conducted using members of the American Production and Inventory Control Society. Participants were presented with a case scenario in which a subordinate failed to meet a production quota. They were asked to select the one most appropriate action to take in response to the failure and to rate what the action sought to accomplish. The statistically significant results indicate that both the locus of causality and stability of supervisors' causal attributions, as well as the subordinate's organizational responsibility, has an effect on supervisors' responses to the subordinate's performance.
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An Application of Expectancy Theory to Examine Managers' Motivation to Utilize a Decision Support System
Kenneth C. Snead
Bowling Green State University
Abstract: A continuing gap exists between the capabilities provided by new management information systems (MIS) and the extent to which these systems are accepted and used by individuals (Turner, 1982). When the use of new systems is voluntary, individuals not accepting the system may resist using it. When system use is mandatory, a lack of user acceptance can lead to high error rates, deliberate sabotage, and increased personnel turnover (David and Olson, 1985). A lack of user acceptance can, therefore, negate the potential benefits of a new system, resulting in a less than effective use of organizational resources. Consequently, many practitioners and academicians consider user acceptance to be a primary indicant of successful implementation (Lucas, 1978; Barki and Huff, 1985; Fuerst and Cheney, 1982).
The research problem examined in this study is: Can the principles of expectancy theory explain the motivation of a manager to make maximum use of a newly-developed decision support system (DSS)?
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Revolution in Management Accounting: A Review of Robert S. Kaplan's and Anthony A. Atkinson's Advanced Management Accounting
Germain Boer
Vanderbilt University
Abstract: The revolution in this title refers not to the field of management accounting but to the magnitude of the differences between the first and second editions of Advanced Management Accounting. For example, in the first edition the author used mathematical notation on 166 of 635 text pages (26.1 percent), but in the second edition the authors used such notation on only 30 of 806 pages (3.7 percent). The tone of the first edition is that of a clinical researcher who remains distant and emotionally unconcerned with the subject whereas in the second edition the authors are passionately involved with their material.
The first edition gives correct answers for many management problems; the second says many management problems have several answers. Accounting numbers are treated as precise measures of economic phenomena in the first edition, but in the second they indicate direction and magnitude. Most problems in the early edition provide great practice in number crunching and equation solving, but in the second edition they tax the imagination, the ingenuity, and the thinking skills of the student by providing real world softness and ambiguity. In fact, for some chapters the student will have to search carefully to even find a dollar value anywhere in the problem material. Revolutionary is the only way to describe the changes in this book.
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Joel Dean Seminal Contributor to Management Accounting
Introduction irrelevant.
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William J. Vatter Notable Contributor to Management Accounting
Introduction irrelevant.
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