Mercantilism, management accounting or managerialism? Cost accounting in early nineteenth-century US textile mills

Abstract

In a recent critique of early US cost accounting practice, Hoskin and Macve (1996) conclude that Lawrence Manufacturing Company's 1848 cost accounting reports were purely mercantile and provided no managerial utility. Despite finding mathematically exact allocations and unit costs for different cloth grades and production locations, Hoskin and Macve argue that mill accounting was neither modern nor managerial, descriptors they limit to the exercise of disciplinary control over labour through standard costs and variances. They conclude that scholars have overstated the managerial utility of cost accounting during the first half of the nineteenth century. In rebuttal, this paper garners archival evidence to show that cost accounting was used by early nineteenth-century US textile owner/managers in a variety of decision-making, management control and problem-solving scenarios. Specific attention was directed to evidence in forms other than accounting ledgers and summary statements, i.e. letters, memoranda, cost reports, etc., which might reveal if and how accounting was used to address issues such as make-or-buy, product pricing, wage setting, site selection and asset expansion and acquisition. While the absence of standard costs and variances affirms Hoskin and Macve's narrow interpretation of managerialism, evidence presented refutes their wider, more substantive claim that cost accounting served only mercantile purposes at the US mills.