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ACTIVITY-BASED COSTING BEYOND THE SMOKE AND MIRRORSThe business environment in the 1990s is markedly different from thatof the past when conventional cost accounting procedures wereestablished Activity-based costing ABC pioneered in the late1980s offered a new costing approach consistent with the changedenvironment However ABC did not diffuse rapidly into the businesscommunity This article demonstrates why adopting ABC is important bydocumenting the potential of ABC in supporting contemporary managerialEverything happens faster in business today Even new management toolssome say fads follow a meteoric path For example the ink on newarticles describing activity-based costing ABC was hardly dry beforeconsulting firms had integrated it into their slick brochures andpresentations All they needed was someone to use it To illustrateRomano identified only 110 installations by August 1990 nearly twoyears after the procedure was developed with 77 percent of these intwo major firms 13 Perhaps this phase in the process ofintroducing the new procedure could be called the period of wildover-promise However even by the mid-1990s ABC has not spreadwidely throughout the industry and even in large firms widespreadsuccess of ABC is not obvious 16According to Ness and Cucuzza thousands of companies have adopted orexplored the feasibility of adopting ABC However they estimatethat no more than ten percent of companies now use activity-basedmanagement in a significant number of their operations 11 A surveyconducted by the Institute of Management Accountants cost managementgroup found that only 29 percent of companies used ABC instead oftraditional systems but this was an increase from 25 percent in theprevious year 10 Among reasons cited for low adoption were employeeresistance and major organizational changes required with the use ofABC 11 Some trace the source of slow adoption of ABC to technicalas well as cultural issues 5 Others feel that ABC would be morewidespread in industry if it were marketed better by the costAs the dust has settled ABC has turned out to be less a revolutionarytechnique than a useful refinement to proven systems The costs ofproducts and services
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