Tie method of inderect cost allocation in a management accounting system

The consequences of two different methods of allocating pharmacy costs per patient case were studied. The study was conducted using cost data from Sunnybrook Health Science Centre (SHSC), a 1205-bed teaching hospital in Toronto, Canada. A sample of the 1991-1992 cases for the three case mix groups (CMGs) with the highest total pharmacy cost and the three CMGs with the highest pharmacy cost per case were examined. Information was obtained from patient records and used to produce two sets of data: pharmacy prescription unit costs and pharmacy costs per case using the relative value unit (RVU) method, and pharmacy prescription unit costs and pharmacy costs per case using the workload measurement system (WMS) method. For each case, the difference between the RVU and WMS pharmacy costs was determined. The RVU method consistently produced higher pharmacy costs per case for the CMGs with the highest pharmacy cost per case. If these CMGs are typical of other CMGs with high pharmacy costs per case, then case reimbursement based on the WMS method of cost allocation would result in underfunding of hospitals whose case mix has a high proportion of CMGs with high pharmacy costs per case and overfunding of hospitals whose case mix has a high proportion of CMGs with low pharmacy costs per case. However, the RVU method of cost allocation, although it appears to be more accurate, places a greater data collection burden on pharmacy managers. The RVU and WMS methods of pharmacy cost allocation gave significantly different pharmacy costs per case for the six CMGs studied.

This paper reviews the main characteristics of the provision of urban transit systems in Cairo, namely buses, minibuses, river buses, trams and surface metros, all being currently operated by Cairo Transport Authority (CTA). It presents some generic types of indicators to compare and assess the performance of the five main urban transit systems provided by CTA. The CTA budget plan for the Financial Year 96/97 is reviewed. The absence of any form of cost modelling as an integral part of CTA budget plans is identified. Here, an attempt is made to develop cost models for the main urban transit systems operated by CTA. Four generic approaches for estimating cost models for transit services are comparatively reviewed, namely the causal factor, cost allocation, regression and temporal variation methods. Cost allocation methods are particularly applied in this research to estimate different cost models for the main transit systems operated by CTA. These models are meant to assist in predicting and showing the relative magnitude of expected changes in various cost categories, resulting from systems/services expansion or down-sizing for the transit modes operated by CTA. The development of such models is thought to contribute in raising the cost consciousness in CTA with the ultimate benefit of maximizing system efficiency.

This chapter explains why the techniques and methods of cost and management accounting are important tools in many organisations. In practice, the phrase management accounting is often used to cover both cost and management accounting. Whether the activity is producing game shows for television, manufacturing computers, running a hospital ward or taking tourists on holiday, the organisation’s managers require financial information to help them do their job efficiently and effectively. Cost and management accounting contribute to good management by providing financial information that assists managers in controlling activities, making plans and deciding between alternative courses of action. There are no legal requirements for businesses and other forms of organisation to have a cost and management accounting system, but experience shows that such a system plays a valuable part in the efficient running of any establishment.

Lean management is a philosophy that seeks the continuous improvement and meeting customer demands, through the elimination of any and all types of wastes. Initially rooted in Toyota corporation’s production system, lean management has rapidly spread to various manufacturing and non-manufacturing sectors. Yet, even with such spread of lean management implementation, our understanding of the developments in organisations’ management accounting system (MAS) in the context of lean is still ambiguous. The available literature either from the academic or the consultancy domain problematises the traditional accounting system to work with lean management and suggest either shedding traditional accounting practices at all or using ‘lean accounting’ as a ‘lean-tailored’ accounting system. However, neither the academic nor the consultancy literature succeed in developing an overall theoretical conceptualisation of how an organisation’s MAS works with lean. Nor do they provide an in-depth investigation of the role played by the main lean accounting practice; Value Stream Costing (VSC) and the factors affecting its acceptance or rejection. Additionally, management accounting literature has not contributed much to our academic knowledge on the MAS associated with lean management as a form of horizontal organisation and process innovation. Hence, this research aims at developing a theoretical conceptualisation of the developments in organisations’ management accounting system (MAS) in the context of lean management. Additionally, the research seeks to investigate the performative role of the lean accounting VSC practice and explore the factors affecting managers’ willingness to accept or reject its implementation.A longitudinal case study informed by the use Actor Network Theory (ANT) and Michel Callon’s (2007, 2010) performativity thesis, is conducted on one of the factories of a multinational manufacturing organisation, adopting a lean management system. ANT’s elements of the ‘sociology of translation’ (Callon, 1986; Latour, 1986; Latour, 2005) are used first to develop a literature driven conceptualisation of the current discourse in both consultancy and academic literatures on the MAS associated with lean. Empirically, various human and non-human actors are identified at both the organisation’s local and global levels. Callon’s (1986) and Latour’s (1986, 1996) four moments of translation are used to interpret actors’ interactions making up the developments in organisation’s MAS. Callon’s (1998a) concepts of framing and overflow and performativity thesis (Callon, 2007, 2010) are then used to develop an empirical driven theoretical conceptualisation of the developments in organisation’s MAS in the context of lean. The research tested the performativity of VSC by tracing its effects on product cost and analysed if, or to what extent, the organisation is willing to implement it. The research contributes to both academics and practitioners through providing new nuances on the operation and developments in organisation’s MAS and practices in the context of lean. It also, responds to calls from both management accounting and lean management literatures to the develop more context related management accounting research and provide in depth empirical analysis on the management accounting practices relevant to lean management. The use of ANT unpacked new insights on the social and technical aspects of the developments in an organisation’s MAS in the context of lean. Such aspects include; the influential role of management accountants and consultants in lean organisations, the performative role of operating structures in lean settings and the association between the performativity of accounting calculations and management accounting relational ontology. The literature driven theoretical conceptualisation shows that, more research is needed on actors’ interactions forming the fabrics of organisations’ MAS and how its calculations interact with other actors in a process innovation such as lean. In terms of VSC, the practice performed in an opposite direction to the predictions made for it. In the case study conducted, VSC was mobilised by the factory layout and intentions of the organisation actors; both locally and globally, which may have distorted the expectations from its implementation. Additionally, it was found that committing to a lean accounting tool as VSC can be difficult in the context of headquarters’ pressures and political unrest. Successful VSC implementation, requires organisations to review their needs for product unit costs along with, the construction pattern of their value streams. It is suggested that more case study research is required at the intersection between both MAS and lean management research areas, to help expand academics’ and practitioners’ understanding of the operation and development in the MAS’s of companies implementing a lean management system. Additionally, it would be helpful to provide more empirical evidence on the conditions needed for VSC implementation and continue to explore the role played by other management accounting or lean accounting practices in lean organisations. This strand of literature is still evolving and lacks codification.

Purpose – This study aims to establish the existence of Management Accountant’s Expectation Gap and its perceived variability with management accountants’ competence, management accounting system and organizational structure. As a corollary, it examines the contribution made by management accountants’ competence, management accounting system and organizational structure in closing Management Accountant’s Expectation Gap. Design/methodology/approach – This study is cross-sectional and correlational, and it uses firm-level data that was collected by means of a questionnaire survey from a sample of 242 manufacturing firms in Kampala – Uganda. Findings – Results suggest that management accountants’ competence, management accounting system and organizational structure are significant predictors of Management Accountant’s Expectation Gap. Research limitations/implications – This study focuses on manufacturing firms in Uganda, and it is possible that these results are only applicable to the manufacturing sector. More research is therefore needed to further understand the contribution of management accountants’ competence, management accounting system and organizational structure in narrowing Management Accountant’s Expectation Gap in other sectors such as the accounting firms. Practical implications – The results suggest that policy makers prescribe qualifications for management accountants and outlining roles of management accountants in the accountants’ act 2013 to ensure that management accountants engage in the right roles thus closing the Management Accountant’s Expectation Gap. Originality/value – According to Budding and Wassenaar (2021) study, there is a Management Accountant’s Expectation Gap however, no research has hitherto been undertaken that investigates the individual contribution of Management accountants’ competence, management accounting system, organizational structure in closing the gap.

Although the cost allocation method does not change the total benefits of CHP, the use of various cost allocation methods generally results in significant differences in costs allocated for CHP products. In order to overcome the inadequacy of existing cost allocating methods in theory and in practice, according to the different roles of anergy and exergy in heat supply process of CHP plant, the reduced exergy method for cost allocation is formulated by introducing the concepts of the available anergy and reduced exergy. The contribution of the available anergy is expressed with a user factor, which can reflect different utilization for different practical conditions. Some practical conditions for typical CHP units are computed and compared with existing methods. Calculations show that the cost allocation by using the reduced exergy model is more rational and practical than those by using existing models in terms of embodying the physical meaning.

The article is devoted to the analysis of methods for assessing the financial parameters of strategic innovation cycles in construction companies, in particular using the concept of "Method of cost allocation by activities". In the conditions of constant changes in the construction market, in particular the introduction of innovations, it is important to ensure effective assessment of financial indicators, which contributes to increasing the stability and competitiveness of the company. The method of cost allocation based on activities is one of the most effective tools for calculating costs and determining the feasibility of investments in strategic innovations. The article considers theoretical aspects and practical aspects of applying this method to assess innovation strategies in construction companies. The main task is to determine the effectiveness of innovation cycles from the point of view of their impact on the financial parameters of the company. The analysis is carried out through cost allocation, where each activity is assessed based on its impact on the company's overall costs. This approach allows not only to calculate costs, but also to identify areas for optimizing resources and reducing costs. It is important to note that the application of the method allows for a clear understanding of the effectiveness of various strategic initiatives and allows predicting their economic effect in conditions of dynamic changes in the market. The key aspects of the article are the analysis of the use of the concept in construction companies, the advantages of using the method to improve the strategic management process, as well as opportunities for further development and implementation of innovations in conditions of growing competition. The implementation of this method allows construction companies to manage resources more effectively, reduce costs and increase competitiveness. In particular, it is important that the method contributes to better allocation of investments, risk assessment and increased level of management in the processes of implementing innovations. In addition, this method allows for optimizing costs at different stages of project implementation, thereby improving the overall efficiency of construction companies. Thus, the application of this concept not only improves financial results, but also strengthens the company's position in the competitive market.

Predicting Change in Management Accounting and Control Systems: Additional Evidence from Australia

Management accounting (MA) studies disclosed the significance of MA for organizational change, progress and showed the benefit of a performance measurement process. This is the reason why management of organizations should have MA system (MAS) effectively providing information for decision-making at the acceptable costs. Issue of the right MA tools setting and correct transformation of existing system into the optimal one is not new. Nevertheless, the biggest part of scientific works related to MA is concerned with separate tools of MA and are fragmented. The main aspect of the relevance of this issue is the question what features should have modern MA and how should the existing MA systems be changed into modern ones. The objective of this paper is to examine theoretical and practical assumptions for the development of MAS adjusted with the environment of an organization. According to the mentioned objectives theoretical and practical assumptions for the development of modern MAS adjusted with the environment of an organization and satisfying management needs of timely receiving the most relevant information with no surplus costs was examined in this paper. The analysis of scientific literature, the systemization of results of different researches related to MA, the studies of business companies, the conduction of financial and managerial analysis, the synthesis of management/MA theories, methods and practical cases were made in this research. The research disclosed that MA could be assessed company-wide, seeking to find an optimal configuration of the local management accounting system (Technical - Managerial View). Also different MA theories, MAS of different companies can be compared and the best choice or conclusions can be achieved based on systemization of theories and practices (Pragmatic – Interpretive View). Besides that, relationship between MA and external environment in much wider context can be analyzed (Critical-Socio-Economic View). The performed analysis showed that MAS are strongly influenced by the internal, external environment and objectives of organization. Organizations differently pursue Return on Capital (ROE) maximization. Each type of organization has interim objectives helping them to cope with the obstacles of external/internal environment and to take advantage on possibilities. Companies performing in volatile environment use simpler MAS and vice versa, so different sets of MA tools should be applied to different types of organizations. This assumption is the key matter for the modern MA system creation. Basic principles of modern MAS development state that managers first of all should determine an organization type. Depending on that set of MA techniques adoptable to the particular organization should be determined and applied. Implementation of proposed MA tools demands to organize that on a project basis. Project team should be organized and an approval as well as the support of the top management is mandatory. Acceptance, support and involvement of all management and employees are necessary for a successful change of existing MAS. Constant monitoring of an organization type change, the assessing of MAS effectiveness and top management’s support is necessary for a successful functioning of modern MAS.

The influence of cost management on making management decisions and functioning of the system of strategic management accounting was analyzed in the paper. The main aspects of the influence of strategic management accounting on making effective management decisions in the system of integrated management of business entities were highlighted. The scope of the organizational activity, covered by the strategic management accounting was described.The paper shows the orientation of strategic management accounting towards the formation of the system of modern knowledge, which combines accounting concepts of making effective management decisions with the purpose of formation of business strategy of business entities, aimed at ensuring steady competitive advantages in the business environment. The combination of all these advantages allows economic entities to apply business strategies of various organizational levels in practice.The measurement of quality costs and the preparation of corresponding reports are key functions of the system of management accounting both for industries and service sectors. In both cases, the management accounting system must be able to provide both operational and financial information concerning the quality, including such information as the quantity of defects, reports on the quality costs, reports on the quality costs tendencies and report on the execution of budgets of the quality costs.The systems of management accounting in a broad sense can be classified as the accounting systems at function-oriented management and accounting systems in the management of kinds of activity. Both of these approaches can be applied in practice.

B y any measure, Robert Newton Anthony (1916–2006) was a giant among 20th century academic accountants. After obtaining a Bachelor’s degree from Colby College, he matriculated to the Harvard Business School (HBS), where he earned his M.B.A. and D.B.A. degrees. Bob spent his entire academic career at HBS, retiring in 1983. He is best known as a prolific writer of articles, textbooks, and research reports. He was inducted as a member of the Accounting Hall of Fame (1986), was a recipient of the American Accounting Association’s (AAA) Outstanding Accounting Educator Award (1989), and then was the second recipient of the AAA Management Accounting Section’s Lifetime Contribution to Management Accounting Award (2003), as well as serving as President of the American Accounting Association (1973–1974). In addition, he was elected a Fellow of the Academy of Management (1970). These honors indicate that he was, indeed, a significant contributor to the development of his chosen field of management accounting for over 50 years, and highly respected by his peers. They do not indicate why. My intention is to answer that question. Bob Anthony was the ideal person to be a leader in the post-World War II movement that changed cost accounting into management accounting. He possessed broad interests and not only was an academic, but also was interested in solving problems found in the real world. He was equally comfortable working as an academic and as a manager. He served as Under Secretary (Comptroller) in the Department of Defense for his old friend and fellow Harvard Business School graduate, Robert S. McNamara, from 1965 to 1968. While at the Department, Anthony earned the Defense Department Award for Public Service for developing a system of cost management and control for the Department (Harvard University Gazette 2006). Though many identify him with the diverse set of textbooks he authored or co-authored, he also undertook what we now would identify as field research, e.g., Anthony (1952). His interest in studying accounting and management in a real-world setting informed his views on what

In water resources projects, a cost allocation problem is critical. In this paper, cost allocation methods based on game theory are studied. We focus on the projects with a network, which involves reservoirs, lakes, pipelines and rivers. Water resources development projects with networks have different characteristics from multipurpose reservoir projects. In network projects, the projects by the small number of the members (partial coalitions) may not be feasible. Cost allocation methods need to take the effects from these infeasible coalitions into account. The effectiveness of the weighted Shapley value, the Shapley value using modified cost function, and the network allocation method is compared.

Integrated community energy systems (ICESs) are a modern development of local energy systems by integrating distributed energy resources and local communities. Cost allocation is one of the key issues affecting the success of ICESs. Costs should be allocated to those who cause them, and benefits to those who make the investments. A well-designed cost allocation approach will therefore contribute to a successful implementation and sustainable development of ICESs. This paper presents a general framework for designing cost allocation schemes in ICESs. Various cost allocation methods are proposed to compute the energy bills for local community members in an ICES. In addition, the cost reflectiveness of different cost allocation methods has been computed based on a case study of an ICES to gain insights into how well the costs are allocated. Next to this, the same is also done for the cost predictability to investigate how the energy costs would change in the long term. The results showed that methods with a single energy charging component perform the best in terms of the two criteria. Our assessment can facilitate local community members in selecting a method that satisfies their requirements. Overall, this research contributes to a successful implementation of cost allocation in an ICES.

Topicality. In the context of globalization of the world economy, enterprises of different industries, associated with the interpenetration of technology and capital, are diversifying their financial and economic activities. The effectiveness of its implementation directly depends on the timely focus on the types of goods, works, services that are in demand and competitive. Research on the competitiveness of products of various sectors of the economy is becoming increasingly important. The production of competitive products and ensuring the sustainable position of small and medium-sized enterprises in the agricultural market requires a change in production costs by creating a perfect management accounting system, which provides internal users with information for effective management. After all, the level of competitive products and the results of economic activity of the enterprise largely depend on the level of costs. Aim and tasks. The purpose of writing this study is to identify areas for improving the mechanism of diversification of resource use and cost management in small and medium-sized businesses. Research results. In order to effectively implement the diversification mechanism in the complex of agricultural enterprises, it is necessary to solve a number of micro- and macroeconomic problems. Particular attention should be paid to determining areas for improving the organizational and economic mechanism for diversification of resources used and cost management. The sphere of agriculture as animal husbandry, which remains one of the main branches of agriculture of small and medium business, in relation to the production of competitive products, is studied. Despite the large amount of research, the issues of regulation and optimization of livestock production costs in the management accounting system remain unclear. Theoretical and methodological developments aimed at determining the methods of regulation and optimization of costs for livestock production in the management accounting system, which determines the relevance of the selected topic. The regulation and optimization of costs for livestock production in the management accounting system, the expansion of the concept of «costs», methods of accounting for livestock costs and the main points of cost accounting in production. The production of competitive products and ensuring a stable position of enterprises in the agricultural market requires a change in the cost of livestock products by creating a perfect management accounting system that allows internal users to provide information for effective management. It is noted that in theory and practice there are a number of features of the classification of costs, which take into account various aspects of the agricultural enterprise and form a variety of information for effective management decisions. Thus, experience and research show that the organization of management accounting within a particular agricultural enterprise, focused on meeting the specific information needs of the management system, will ensure its success in dynamic economic conditions and help solve a wide range of problems to optimize livestock production costs. Conclusions. Based on the study, it can be stated that the improvement of the diversification mechanism should be defined as a set of methods and forms of management activities aimed at identifying and rational use of the most profitable opportunities to achieve the goals. The management system of production diversification includes methods and procedures of analysis, planning and control, as well as feedback, which allows to improve the quality of management decisions. Further research has been formed on the formation of a system of accounting for the cost of livestock products, capable of generating information flows for management decisions, which requires a sound approach to determining the objects of accounting and costing, establishing their relationship and interdependence.

Problems of allocating joint costs in a reasonable way arise in many practical situations where people decide to work together to save costs. Cost allocation methods based on game theoretical concepts take into account the strategic aspects of cost allocation situations. We give a survey of cost allocation methods based on the nucleolus and the Shapley value, and introduce also a new one, the so-called cost gap allocation method which is based on the τ-value. It is shown that for some large subclasses of cost allocation problems this new cost allocation method coincides with old separable cost methods proposed in the thirties by the Tennessee Valley Authority and also with the separable costs-remaining benefits (SCRB) method. Properties of this cost gap allocation method are also treated.