MCFM
Control & Performance Management
Sessions 2+3
Lecture Materials
Winter 2024
HRA
Reporting for Control & Performance Management
Sessions 2+3
Table of Contents
Material 1:
Lecture (Sessions 2+3) on “Cost Analysis & Budgeting Process”
(Page 3)
Material 2:
Exercises, Problems and Mini-Quiz
(Page 37)
Material 3:
(Page 49)
Maria Joao Martins Ferreira Major (2012), Management
Accounting Change in the Portuguese Telecommunications
Industry, Journal of Management and Business Studies, Vol.
14(4) pp. 115-125, May 2012.
CFM_RC&PM Lecture – Sessions 2+3 – Winter 2024
MCFM
Control & Performance Management
Sessions 2 + 3
WINTER 2024
HRA
1
Sessions 2+3 Outline
• Discuss about costs classification and performance
measures of the production process;
• Discuss about management accounting applications and the
concept of break-even in business planning;
• Examine the objectives and role of planning, management
control and performance analysis;
• Discuss about budget preparation and practices for decision
making; Explain how standard costs are developed;
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
2
2
SKM_BS (W2024)
3 sur 59
1
Part 1
Cost analysis & Decision Making:
Performance Measures
3
Reminder: Building Blocks
of Managerial Accounting
• Have an efficient Cost Management Systems,
• Assist in Preparation of financial statements,
• Clear Identification of costs nature and costs behavior
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
4
4
SKM_BS (W2024)
4 sur 59
2
Cost Accounting
& Decision Making
ü To control costs
ü To measure and improve productivity
ü To devise improved production process
ü To decide on new products
ü To decide on obsolete products
ü To decide on prices
ü To respond to rival products (Johnson and Kaplan, 1987)
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
5
5
Section 1
Costs Classifications
6
SKM_BS (W2024)
5 sur 59
3
Classifications of Costs
Manufacturing costs
are often classified as follows:
Direct
Material
Direct
Labour
Manufacturing
Overhead
Prime
Cost
MCFM - Winter 2024
Conversion
Cost
Sessions 2 +3: Cost Analysis & Budgeting Process
7
7
Manufacturing Overhead
Manufacturing Overhead includes all costs of
manufacturing except direct material and direct labour.
Examples: Indirect materials and indirect labour
Materials used to support the
production process.
Examples: lubricants and cleaning
supplies used in the automobile
assembly plant.
MCFM - Winter 2024
Wages paid to employees who
are not directly involved in
production work.
Examples: maintenance workers,
janitors and security guards.
Sessions 2 +3: Cost Analysis & Budgeting Process
8
8
SKM_BS (W2024)
6 sur 59
4
Relationship between Direct &
Indirect Costs
Fair share of
indirect cost
(overheads)
Direct cost of
the unit
Full cost of the unit
9
Sessions 2 +3: Cost Analysis & Budgeting Process
MCFM - Winter 2024
9
Methods of Overheads Allocation
• Variable costing
– product cost includes variable production costs
– all fixed costs treated as period costs
• Absorption costing (traditional method)
– all (fixed and variable) production costs are charged to cost centers
and then to product/services using an allocation base that reflects
activity, e.g. labor hours
• Activity-based costing (ABC method)
– uses cost pools to accumulate the cost of significant business
processes or activities and then assigns the costs from the cost pools
to products based on cost drivers, which measure each product/
service’s demand for activities
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
10
10
SKM_BS (W2024)
7 sur 59
5
Traditional (Full) Costing System
Direct
Material
Resource
Direct
Labor
Resource
Direct
Trace
Direct
Trace
All
Indirect
Resources
Cost
Driver
Products
MCFM - Winter 2024
All
Unallocated
Costs
Unallocated
Sessions 2 +3: Cost Analysis & Budgeting Process
11
11
A two-stage Allocation Process
(traditional costing system)
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
12
12
SKM_BS (W2024)
8 sur 59
6
The ABC Approach
§ “Sophisticated” application of Full (Traditional) Costing Method, the ABC
method is considered to improve managerial accounting information
§ Expenses are caused by activities (including overheads).
§ The system accumulates overhead costs for each activity, then assigns
the costs of activities to the products or cost objects that require that
activity.
§ A COST DRIVER for each activity!
COST DRIVER : Any output measure that causes costs
(that causes the use of costly resources).
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
13
13
The 2-Stage allocation process
(ABC System)
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
14
14
SKM_BS (W2024)
9 sur 59
7
2-Stage Activity-Based Cost System
Direct
Materials
Direct
Labor
Shipping
Costs
Overhead Costs
First-Stage Allocation
Order
Size
Customer
Orders
Product
Design
Customer
Relations
Other
Cost Objects:
Products, Customer Orders, Customers
15
Sessions 2 +3: Cost Analysis & Budgeting Process
MCFM - Winter 2024
15
2-Stage Activity-Based Cost System
Direct
Materials
Direct
Labor
Shipping
Costs
Overhead Costs
First-Stage Allocation
Customer
Orders
Product
Design
Order
Size
Customer
Relations
Other
Second-Stage Allocations
$/Order
$/Design
$/MH
$/Customer
Cost Objects:
Products, Customer Orders, Customers
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
Unallocated
16
16
SKM_BS (W2024)
10 sur 59
8
How Costs are Treated Under
Activity–Based Costing
An event that causes the
consumption of overhead
resources.
Activity
Activity
Cost Pool
$$
$
$ $
$
A “cost bucket” in which
costs related to a
particular activity measure
are accumulated.
Sessions 2 +3: Cost Analysis & Budgeting Process
MCFM - Winter 2024
17
17
How Costs are Treated Under
Activity–Based Costing (2)
The term cost driver is
also used to refer to an
activity measure.
Activity
Measure
An allocation base
in an activity-based
costing system.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
18
18
SKM_BS (W2024)
11 sur 59
9
Benefits of ABC
• Provide more accurate costing
– Less likely to under-cost / over-cost due to cost drive usage
• May lead to improvements in cost control
– Costs divided into a number of activities as compared to two
overhead cost pools
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
19
19
Recap: Cost Classifications for
Predicting Cost Behaviour
How a cost will react to changes in the level of activity
within the relevant range.
– Total variable costs change when activity changes.
– Total fixed costs remain unchanged when activity
changes.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
20
20
SKM_BS (W2024)
12 sur 59
10
Recap: Understanding Cost Behavior
Summary of Variable and Fixed Cost Behaviour
Cost
In Total
Per Unit
Variable
Total variable cost is
proportional to the activity
level within the relevant range.
Variable cost per unit remains
the same over wide ranges
of activity.
Total fixed cost remains the
same even when the activity
level changes within the
relevant range.
Fixed cost per unit goes
down as activity level goes up.
Fixed
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
21
21
Relationship between Direct, Indirect,
Variable and Fixed Costs of a Product Cost
Fixed
cost
Indirect cost
(overheads)
Direct cost
MCFM - Winter 2024
Variable
cost
Total (or full) cost
of a particular job
or product cost
Sessions 2 +3: Cost Analysis & Budgeting Process
22
22
SKM_BS (W2024)
13 sur 59
11
Recap: Manufacturing Cost Flows
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
23
23
SUMMARY OF COST CLASSIFICATIONS
Purpose of Cost Classification
Cost Classifications
Preparing external financial statements
• Product costs (inventoriable)
• Direct materials
• Direct labour
• Manufacturing overhead
• Period costs (expensed)
• Non-manufacturing costs
• Marketing or selling costs
• Administrative costs
Predicting cost behavior in response to changes in
activity
• Variable cost (proportional to activity)
• Fixed cost (constant in total)
Assigning costs to cost objects such as
departments or products
• Direct cost (can easily be traced)
• Indirect cost (cannot easily be traced; must be
allocated)
Making decisions
• Differential cost (differs between alternatives)
• Sunk cost (past cost not affected by a decision)
• Opportunity cost (forgone benefit)
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
24
24
SKM_BS (W2024)
14 sur 59
12
Section 2:
Cost Accounting – A Managerial Approach
25
Cost Accounting & Decision-Making
• How management accounting could contribute to decisionmaking?
– Cost behaviour analysis,
– CVP (Cost-Volume-Profit) analysis,
• Contribution, breakeven & margin of safety calculations,
operating leverage
– Alternative approaches to pricing
• Cost-plus, target rate of return, optimum selling price, special
pricing decisions, transfer pricing
– Segmental profitability (profit contribution), similar to IFRS 8
approach.
• Avoidable & unavoidable costs
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
26
26
SKM_BS (W2024)
15 sur 59
13
Cost-Volume-Profit Relationship Interactions
• Cost-volume-profit (CVP) analysis is a powerful tool that
managers use to help them understand the interrelationship
among cost, volume and profit in an organization by focusing on
interactions among the following five elements:
1.prices of products
2.volume or level of activity
3.per unit variable costs
4.total fixed costs
5.mix of products sold
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
27
27
Graph of total cost against the
volume of activity
Cost
(€)
Total cost
Variable
costs
F
Fixed costs
0
MCFM - Winter 2024
Volume of activity (units of output)
Sessions 2 +3: Cost Analysis & Budgeting Process
28
28
SKM_BS (W2024)
16 sur 59
14
Break-Even Analysis
• Break-even analysis is an aspect of CVP analysis that is
designed to answer questions such as how far sales
could drop before the company begins to lose money.
MCFM - Winter 2024
29
Sessions 2 +3: Cost Analysis & Budgeting Process
29
Break-even chart
Revenue/Cost (€)
Total sales
revenue
Break even
point
Pro
fit
Total cost
Variable costs
F
Lo
ss
Fixed costs
0
MCFM - Winter 2024
Volume of activity (units of output)
Sessions 2 +3: Cost Analysis & Budgeting Process
30
30
SKM_BS (W2024)
17 sur 59
15
Contribution Margin Analysis
The contribution income statement is helpful to managers in judging
the impact on profits of changes in selling price, cost, or volume. The
emphasis is on cost behaviour.
Example Company
Contribution Income Statement
For the Month of June
Sales (500 units)
$
Less: Variable expenses
Contribution margin
Less: Fixed expenses
Net operating income
$
250,000
150,000
100,000
80,000
20,000
Contribution Margin (CM) is the amount remaining from sales
revenue after variable expenses have been deducted.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
31
31
CM Ratio Assessment
• The contribution margin ratio is determine as follow:
CM Ratio =
Total CM
Total sales
• Or, in terms of units, the contribution margin ratio is:
CM Ratio =
MCFM - Winter 2024
Unit CM
Unit selling price
Sessions 2 +3: Cost Analysis & Budgeting Process
32
32
SKM_BS (W2024)
18 sur 59
16
Break-Even Analysis
The contribution format income statement can be
stated in equation form:
Profits = (Sales – Variable expenses) – Fixed expenses
OR
Profits = [P x Q] – [V x Q] - Fixed expenses
Where P = selling price per unit, Q = number of units sold; and
VC = variable costs per unit.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
33
33
Break-Even Analysis
Profits = [P x Q] – [V x Q] - Fixed expenses
We can simplify the above formula:
Profits = [CM x Q] – Fixed expenses
The Break-even point is when profits are zero,
therefore the equation becomes:
Break-even point in units sold =
MCFM - Winter 2024
Fixed expenses
Unit CM
Sessions 2 +3: Cost Analysis & Budgeting Process
34
34
SKM_BS (W2024)
19 sur 59
17
Break-Even Analysis
Break-even point in units sold =
Fixed expenses
Unit CM
A variation of the break-even formula using the CM
ratio instead of the unit CM is shown below.
The result using this formula is the break-even in total
sales dollars rather than in total units sold:
Break-even point in =
Total sales dollars
Fixed expenses
CM ratio
35
Sessions 2 +3: Cost Analysis & Budgeting Process
MCFM - Winter 2024
35
Break-Even Analysis
• Here is the information from Example Company:
Sales (500 units)
Less: variable expenses
Contribution margin
Less: fixed expenses
Net operating income
MCFM - Winter 2024
Total
$ 250,000
150,000
$ 100,000
80,000
$ 20,000
Per Unit
$ 500
300
$ 200
Sessions 2 +3: Cost Analysis & Budgeting Process
Percent
100%
60%
40%
36
36
SKM_BS (W2024)
20 sur 59
18
Break-Even Analysis
We calculate the break-even point as follows:
Break-even point in units sold = Fixed expenses
Unit CM
= $80,000 / 200
= 400 units
Break-even point in
total sales dollars
MCFM - Winter 2024
=
Fixed expenses
CM ratio
= $80,000 / 40%
= $200,000
Sessions 2 +3: Cost Analysis & Budgeting Process
37
37
Target Operating Profit Analysis
• CVP formulas can also be used to determine the
sales volume needed to achieve a target operating
profit.
• Suppose Example Company wants to know how many
units must be sold to earn a profit of $100,000.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
38
38
SKM_BS (W2024)
21 sur 59
19
Target Operating Profit Analysis
Units sold to attain
Fixed expenses + Target operating profit
=
the target profit
Unit contribution margin
$80,000 + $100,000
= 900 units
$200/unit
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
39
39
The Margin of Safety
The margin of safety is the excess of budgeted (or actual)
sales over the break-even volume of sales.
Margin of safety = Total sales – Break-even sales
Margin of safety percentage =
Margin of safety in $
Total budgeted (or actual) sales
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
40
40
SKM_BS (W2024)
22 sur 59
20
Weaknesses of Breakeven Analysis
Three general problems
Non-linear relationships
Stepped fixed costs
Multi-product
businesses
MCFM - Winter 2024
41
Sessions 2 +3: Cost Analysis & Budgeting Process
41
Operating Leverage
A measure of how sensitive net operating income is to
percentage changes in sales.
Degree of
=
operating leverage
Contribution margin
Operating income
% change in
=
operating income
Degree of Op. Leverage x % change in sales
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
42
42
SKM_BS (W2024)
23 sur 59
21
Operating Leverage
Example Company, the degree of operating leverage is 5:
Sales
Less: variable expenses
Contribution margin
Less: fixed expenses
Net income
$100,000
$20,000
MCFM - Winter 2024
Actual sales
500 Units
$
250,000
150,000
100,000
80,000
$
20,000
= 5
43
Sessions 2 +3: Cost Analysis & Budgeting Process
43
Operating Leverage (cont’d)
With an operating leverage of 5, if sales are increased by
10%, net operating income would increase by 50%.
Percent increase in sales
Degree of operating leverage
Percent increase in profits
×
10%
5
50%
Here’s the verification!
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
44
44
SKM_BS (W2024)
24 sur 59
22
Operating Leverage (cont’d)
Sales
Less variable expenses
Contribution margin
Less fixed expenses
Net operating income
Actual
sales
$ 250,000
150,000
100,000
80,000
$ 20,000
Increased
sales (550)
$ 275,000
165,000
110,000
80,000
$ 30,000
10% increase in sales from
$250,000 to $275,000 . . .
. . . results in a 50% increase in
income from $20,000 to $30,000.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
45
45
Cost Structure and Profit Stability:
Marginal Analysis
§ Cost structure refers to the relative proportion of fixed
and variable costs in an organization.
§ Managers often have some latitude in determining
their organization’s cost structure (i.e. avoidable vs.
unavoidable costs).
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
46
46
SKM_BS (W2024)
25 sur 59
23
Conclusion on Marginal Analysis
May be used in four key areas of decision
making:
1
2
3
4
MCFM - Winter 2024
Accepting/rejecting special contracts
Determining the most efficient use
of scarce resources
Make-or-buy decisions
Closing or continuation decisions
Sessions 2 +3: Cost Analysis & Budgeting Process
47
47
Part 2
Planning, Budgeting & Management Control
48
SKM_BS (W2024)
26 sur 59
24
What is a Management Control
System?
• A management control system is a logical integration of
management accounting tools to gather and report data
and to evaluate and analyze performance
Purposes of a management control system:
• Management control system gathers and reports
information on performance at different levels:
•
•
•
•
Total-organisation level
Customer/market level
Individual-facility level
Individual-activity level.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
49
49
Planning, Control & Performance
Analysis
• Planning and budgeting processes involve formal reviews of
plans and include the actions that are felt to be good for the
organization to take — action controls
• Planning and budgeting processes serve to get information
needed for decision making to the right managers — personnel
controls
• Budgeting involves setting targets which are often used later as
standards against which to evaluate performance — results
controls
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
50
50
SKM_BS (W2024)
27 sur 59
25
Advantages of Planning & Budgeting
Define goal
and objectives
Communicate
plans
Think about and
plan for the future
Advantages
Coordinate
activities
Means of allocating
resources
Uncover potential
bottlenecks
MCFM - Winter
51
2024
Sessions 2 +3: Cost Analysis & Budgeting Process
51
The Role of Budgets and Budgeting
• A budget is a quantitative expression of the planned
money inflows and outflows that reveal whether a
financial plan will meet organizational objectives,
• Budgeting is the process of preparing budgets,
• Budget provides a way to communicate the
organization’s short-term goals to its employees,
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
52
52
SKM_BS (W2024)
28 sur 59
26
The Role of Budgets and Budgeting (2)
• Budgeting the activities of each unit can:
– Reflect how well unit managers understand organization’s
goals,
– Provide an opportunity for the organization’s senior planners
to correct misperceptions about organization’s goals,
• Budgeting also serves to coordinate the many activities
of an organization
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
53
53
The Role of Budgets and Budgeting (3)
• Budgets help to anticipate potential problems, such as:
– Borrowing needs as the budget reflects the cash cycle and
provides information to anticipate cash shortages,
– If budget planning indicates that organization’s sales potential
exceeds it manufacturing potentials, then the organization
can develop a plan to put more capacity in place or to reduce
planned sales.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
54
54
SKM_BS (W2024)
29 sur 59
27
The Elements of Budgeting
• Budgeting involves forecasting the demand for
three types of key resources:
– Resources that create variable costs,
– Resources (short and long-term) that create fixed costs,
– Resources that enhance the potential of the organization’s
strategy.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
55
55
Stages in the Budgeting Process
1.Communicate details of budget policy and guidelines to those
people responsible for preparing the budget.
2. Determine the factor that restricts output.
3. Preparation (forecasting) of the sales budget.
4. Initial preparation of budgets.
5. Negotiation of budgets with higher management.
6. Co-ordination and review of budgets.
7. Final acceptance of budgets.
8. Ongoing review of the budgets.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
56
56
SKM_BS (W2024)
30 sur 59
28
Sales Budgeting Principles
• Proper accounting system to measure performance
product-wise, territory-wise, customer-wise and sales
person-wise,
• Ensure planning premises or assumptions are made
based on accurate information obtained from
dependable sources,
• Sales forecasts should be reliable.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
57
57
Sales Budgeting Approach
• By and large, budgets are prepared for a period of one
year. In some companies, budgets are prepared for
longer periods e.g. 5 years or more,
• Basically, sales budget consists of forecasts of sales
volume and profit,
• From sales volume we derive sales revenue, and we
estimate net (sales) profit by reducing sales expenses
from sales revenue,
• Thus, sales budget mainly consists of sales volume
section and sales expenses section.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
58
58
SKM_BS (W2024)
31 sur 59
29
Method of Estimating Sales Expenses
• Deciding how much to spend on field sales activities
is one of the most difficult task in saes budget,
• Following methods are commonly used:
– Historical data,
– Percentage of sales method,
– The work load method, or
– Standard costs method.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
59
59
Planning and Budgeting Tools
• Standard Cost:
– Measures total costs (by nature) to produce a product or
service under anticipated conditions,
– Often refers to the cost of a single unit.
• Budgeted Cost:
– The cost, at standard cost, of the total number of planned
(budgeted) units.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
60
60
SKM_BS (W2024)
32 sur 59
30
Budget is a Plan
• Budget is a the financial plan of sales activities which
are estimated in terms of quantity and value,
• Once the sales budget is approved, it is left to the sales
department persons to implement their plan, within the
time frame and cost frame envisaged,
• Thus, sales budget serves as a “standard” or “quota” of
the various activities of the organization, the next
logical step to planning and budgeting.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
61
61
Planning & Budgeting Analysis
• Prepare a static budget, or a Master Budget, a budget
based on the level of output planned at the start of the
budget period,
• Develop a flexible budget using budgeted revenues or
cost amounts based on the level of output actually
achieved,
• Compute the difference and measure how the
difference in level of activity (actual vs. Forecast)
affected your planning process.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
62
62
SKM_BS (W2024)
33 sur 59
31
Master Budget Summarized
— A combination of all the budgets of an organisation.
— All the budgets in a master budget link back to the
assumptions made about the quantity and value of
sales incorporated in the sales budget.
— Therefore, it’s very important to get these
assumptions right.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
63
63
The Master Budget: An Overview
Ending
Finished Goods
Budget
Direct
Materials
Budget
Sales
Budget
Production
Budget
Selling and
Administrative
Budget
Direct
Labor
Budget
Manufacturing
Overhead
Budget
Cash
Budget
Budgeted Financial Statements
MCFM - Winter
2024
Sessions 2 +3: Cost Analysis & Budgeting Process
64
64
SKM_BS (W2024)
34 sur 59
32
Functional Budgets
MCFM - Winter
2024
Sessions 2 +3: Cost Analysis & Budgeting Process
65
65
Budgeted Income Statement
using IFRS format, or not?
MERCHANDISING
PROFESSIONAL SERVICES*
Budgeted Income Statement
Fees income
Sales
Purchases >> COGS
Professional and support
labour costs
e.g. lawyer + legal assistant
Marketing expenses
Admin. expenses
Financial expenses
Marketing expenses
Admin. expenses
Financial expenses
Cash
budget
* sell expertise and knowledge
MCFM - Winter 2024
MANUFACTURING
Sales
Production + Ending Inventories
* direct materials (usage + purchases)
* direct labour
* factory overhead
>> COGS
Marketing expenses
Admin. expenses
Financial expenses
Capital expenditure
budget
Budgeted balance sheet
Sessions 2 +3: Cost Analysis & Budgeting Process
66
66
SKM_BS (W2024)
35 sur 59
33
Main Criticisms of Budgeting
1. Encourages rigid planning and incremental thinking;
2. Very time-consuming; commits the company to a 12 month
commitment, which can be risky if budgets are based on uncertain
forecasts;
3. Represents a yearly rigid ritual; produce inadequate variance
reports leaving the ‘how’ and ‘why’ questions unanswered;
4. Encourages spending what is in the budget even if this is not
necessary in order to guard against next year’s budget being
reduced;
5. Focus on achieving the budget even if this results in undesirable
actions.
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
67
67
Any Questions?
MCFM - Winter 2024
Sessions 2 +3: Cost Analysis & Budgeting Process
68
68
SKM_BS (W2024)
36 sur 59
34
MCFM
FINANCIAL CONTROL & PERFORMANCE MANAGEMENT
SESSIONS 2+3
EXERCISES & PROBLEMS
WINTER 2024
Part I: Costs Analysis & Performance Measures
SECTION I: Cost-Volume-Profit Analysis
Exercise 1. 1: Cost of Production, Cost per Unit
Denver City Manufacturing currently produces 2,000 glasses per month. The following per unit data apply for
sales to regular customers and is based on 1,000 units produced.
Direct materials
Direct manufacturing labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total manufacturing costs
$200
40
70
50
$360
The plant has capacity for 3,000 glasses. Plant supervisor's salary is $15,000.
Required:
a. What is the total cost of producing 2,000 glasses?
b. What is the total cost of producing 1,600 glasses?
c. What is the per unit cost when producing 1,600 glasses?
Exercise 1. 2: Contribution Margin
Arthur's Plumbing reported the following:
Revenues
Variable manufacturing costs
Variable nonmanufacturing costs
Fixed manufacturing costs
Fixed nonmanufacturing costs
$4,500
$ 900
$ 810
$ 630
$ 545
Required:
a.
b.
c.
d.
e.
Compute contribution margin.
Compute contribution margin percentage.
Compute gross margin.
Compute gross margin percentage.
Compute operating income.
SKM_CPM (Sessions 1+2) – QUESTIONS of Exercises & Problems (Winter 2023)
37 sur 59
1 of 11
Exercise 1. 3: Contribution Margin, Breakeven Point
Anglico's most recent income statement is given below.
Sales (8,000 units)
$160,000
Less variable expenses
(68,000)
Contribution margin
92,000
Less fixed expenses
(50,000)
Net income
$42,000
Required:
a.
b.
c.
d.
e.
f.
g.
Contribution margin per unit is
If sales are doubled total variable costs will equal
If sales are doubled total fixed costs will equal
If 20 more units are sold, profits will increase by
Compute how many units must be sold to break even
Compute how many units must be sold to achieve
operating income of $60,000
Compute the revenue needed to achieve an after tax
income of $30,000 given a tax rate of 30%
$ ________ per unit
$ ________
$ ________
$ ________
# ________
# ________
$ ________
Exercise 1. 4: Breakeven Point, Operating Income
In 2017, Craylon Company has sales of $1,000,000, variable costs of $250,000, and fixed costs of $200,000.
In 2018, the company expects annual property taxes to decrease by $15,000.
Required:
a. Calculate operating income and the breakeven point for 2017.
b. Calculate the breakeven point for 2018.
Exercise 1. 5: Breakeven Point, Margin of Safety
Furniture, Inc., sells lamps for $30. The unit variable cost per lamp is $22. Fixed costs total $9,600.
Required:
a.
b.
c.
d.
What is the contribution margin per lamp?
What is the breakeven point in lamps?
How many lamps must be sold to earn a pretax income of $8,000?
What is the margin of safety, assuming 1,500 lamps are sold?
Exercise 1.6: CVP Analysis
Ben’s Bikes sells two mountain bikes for every four street bikes. The mountain bike sells for $2,000 and has
variable costs of $1,250. The street bike sells for $500 and has variable costs of $200. If Ben’s Bikes fixed
costs total $1,620,000, how many bikes must be sold in order for the company to break even? How many of
these bikes will be mountain bikes and how many will be the street bikes?
SKM_CPM (Sessions 1+2) – QUESTIONS of Exercises & Problems (Winter 2023)
38 sur 59
2 of 11
Exercise 1. 7: Breakeven Point Projections
Dental Comfort Services provides dental cleanings to its patients. The selling price of a cleaning is $150 and
the variable costs associated are $85. The monthly relevant fixed costs are $10,000.
Required:
a.
b.
c.
d.
What is the breakeven point in cleanings?
What is the margin of safety in dollars, assuming sales total $30,000?
What is the breakeven level in cleanings, assuming variable costs decrease by 20%?
What is the breakeven level in dollars, assuming the selling price goes down by 10% and fixed costs
increase $1,000 per month?
Exercise 1.8: Contribution margin, break-even and target profit analysis
Last month’s contribution income statement for Nord Corporation, a manufacturer of exercise bicycles, follows:
Sales (500 bikes) ............................
Variable expenses ..........................
Contribution margin .........................
Fixed expenses ...............................
Net operating income ......................
Total
$250,000
150,000
100,000
80,000
$ 20,000
Per Unit
$500
300
$200
Required:
1. Compute the contribution margin and the net operating income for monthly sales of 1; 2; 400; and 401
bikes.
2. Compute the contribution margin ratio (500 bikes). Assume that Nord Corporation’s sales increase by
$150,000 next month. What will be the effect on (1) the contribution margin and (2) net operating
income?
3. Compute the break-even point in quantity and in sales using the equation method
4. Target profit analysis. Assume that Nord Corporation’s target profit is $70,000 per month. How many
exercise bikes must it sell to reach this goal?
Exercise 1.9: Margin of safety and operating leverage concepts
Companies A & B manufacture basketballs. However, the structure of their costs is substantially different:
Sales ...........................................................
Variable expenses.......................................
Contribution margin .....................................
Fixed expenses ...........................................
Net operating income ..................................
Company A
$500,000
100%
350,000
70%
150,000
30%
90,000
$ 60,000
Company B
$500,000
100%
100,000
20%
400,000
80%
340,000
$ 60,000
Required:
1. The margin of safety represents the excess of budgeted (or actual) sales over the break-even sales.
The margin of safety can be expressed either in dollar or in percentage form. Compare the break-even
point (in $ sales) and the margin of safety (in $ sales and in percentage) of these 2 companies.
SKM_CPM (Sessions 1+2) – QUESTIONS of Exercises & Problems (Winter 2023)
39 sur 59
3 of 11
2. Operating leverage measures how a given percentage change in sales affects net operating income.
Compute the degree of operating leverage (CM / net income) of both companies. Assume that both
company A and company B experience a 10% increase in sales, how will it affect the net operating
income and the degree of operating leverage?
Exercise 1.10: Multiple products break-even analysis
A company has multiple products, X & Y. The overall contribution margin (CM) ratio is usually used in breakeven analysis:
Product X
Sales ..............................................
$100,000
100%
Variable expenses .........................70,000
70%
Contribution margin .......................
$ 30,000
30%
Fixed expenses..............................
Net operating income.....................
Product Y
$300,000
100%
120,000
40%
$180,000
60%
Total
$400,000
100.0%
190,000
47.5%
210,000
52.5%
141,750
$ 68,250
Required:
1. Compute the overall contribution margin ratio and the break-even in $ sales.
2. Assume that total sales remain unchanged at $400,000. However, the sales mix shifts so that more of
Product X ($300,000) is sold than of Product Y ($100,000). Compute the new overall contribution
margin ratio and the new break-even in $ sales.
Exercise 1.11: Fixed vs. variable cost of production
The Saari Dress Co. has the following behaviour patterns:
Production range in units
Fixed costs (in €)
0 – 5,000
150,000
5,001 – 10,000
220,000
10,001 – 15,000
250,000
15,001 – 20,000
270,000
Maximum production capacity is 20,000 dresses per year. Variable costs per unit are 30€ at all production
levels.
Required:
Each situation described below is to be considered independently.
a. Production and sales are expected to be 11,000 dresses for the year. The sales price is 50€ per dress.
How many additional dresses need to be sold, in an unrelated market, at 40€ per dress to show a total
overall operating income of 9,000€ for the year?
b. The company has orders for 23,000 dresses at 50€. It desires to make a minimum overall operating
income of 145,000€ on these 23,000 dresses. What unit purchase price is the company willing to pay a
subcontractor for the 3,000 dresses it cannot manufacture itself? Assume that the subcontractor would
bear all costs: manufacturing, delivery, etc. However, the customers would pay Saari directly. (Hint:
compute first the operating income for the 20,000 dresses Saari manufactures itself).
SKM_CPM (Sessions 1+2) – QUESTIONS of Exercises & Problems (Winter 2023)
40 sur 59
4 of 11
SECTION II: Cost Analysis and Decision Making
Exercise 2.1: Product and Customer Profitability Analysis
Updraft Systems, Inc. makes paragliders for sale through specialty sporting goods stores. The company has a
standard paraglider model, but also makes custom-designed paragliders. Management has designed an
activity-based costing system with the following activity cost pools and activity rates:
Management would like an analysis of the profitability of a particular customer, Eagle Wings, which has
ordered the following products over the last 12 months:
The company's direct labor rate is $19 per hour.
Required:
Using the company's activity-based costing system, compute the customer margin of Eagle Wings.
MCFM_FC&PM (Sessions 2+3) – QUESTIONS of Exercises & Problems (W2024)
41 sur 59
5 - 11
Exercise 2.2: Product profitability using traditional vs. ABC costing method
Islands Industries Ltd makes three products: Mykos, Kanos and Helios. The budget prepared for the next year
includes the following information:
Table 1: Budget information
Mykos
50,000
45
32
2
7
Sales and production (units)
Selling price (€ per unit)
Direct labour and materials (€ per unit)
Machine hours per unit in machining dept
Direct labour hours per unit in assembly dept
Kanos
40,000
95
84
5
3
Helios
30,000
73
65
4
2
Overheads allocated and apportioned to production departments (including service cost centres) were to be
recovered in product costs as follows:
Machining department at €1.20 per machine hour,
Assembly department at €0.825 direct labour hour.
However, you have determined that the overheads could be reanalyzed into cost pools, as in Table 2.
Table 2: Activity cost pools and drivers
Cost Pools
Machining services
Assembly services
Set-up costs
Order processing
Purchasing
€ Cost
357,000
318,000
26,000
156,000
84,000
Cost Drivers
Machine hours
Direct labour hours
Set-ups
Customer orders
Supplier orders
Quantity
420,000
530,000
520
32,000
11,200
You have also been provided with the estimates for the period, as in the following Table 3.
Table 3: Estimates
Number of set-ups
Customers orders
Supplier orders
Mykos
120
8,000
3,000
Kanos
200
8,000
4,000
Helios
200
16,000
4,200
Required:
1. Prepare and present a profit calculation showing the profitability of each product using traditional
absorption costing,
2. Prepare and present a profit calculation showing the profitability of each product using activity-based
costing,
3. Explain the differences between the product profitability using absorption and activity-based costing.
MCFM_FC&PM (Sessions 2+3) – QUESTIONS of Exercises & Problems (W2024)
42 sur 59
6 - 11
Exercise 2.3: Customer profitability distribution
“Figure Four Ltd” is a distributor of pharmaceutical products. Its ABC system has five activities:
1
2
3
4
5
Activity Area
Cost Driver Rate in 2012
Order processing
Line-item ordering
Store deliveries
Carton deliveries
Shelf-stocking
$40 per order
$3 per line item
$50 per store delivery
$1 per carton
$16 per stocking-hour
Rick Flair, the controller of Figure Four, wants to use this ABC system to examine individual customer
profitability within each distribution market. He focuses first on the Ma-and-Pa single-store distribution market.
Two customers are used to exemplify the insights available with the ABC approach. Data pertaining to these
two customers in August 2012 are as follows:
Total orders
Average line items per order
Total store deliveries
Average cartons shipped per store delivery
Average hours of shelf-stoking per store delivery
Average revenue per delivery
Average cost of goods sold per delivery
Charleston
Pharmacy
13
9
7
22
0
$2,400
$2,100
Chapel Hill
Pharmacy
10
18
10
20
0.5
$1,800
$1,650
Required:
1. Use the ABC information to compute the operating income of each customer in August 2012.
Comment on the results and what, if anything, Flair should do.
2. Flair ranks the individual customers in the Ma-and-Pa single-store distribution market on the basis of
monthly operating income. The cumulative operating income of the top 20% of customers is $55,650.
Figure Four reports operating losses of $21,247 for the bottom 40% of its customers. Make four
recommendations that you think Figure Four should consider in light of this new customer profitability
information.
MCFM_FC&PM (Sessions 2+3) – QUESTIONS of Exercises & Problems (W2024)
43 sur 59
7 - 11
Part II: Planning & Budgeting
EXERCISE 1: Sales Budget
In 2022, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for $290 each and
16,400 lead tests for $240 each. Because newer homes are being built with lead-free pipes, lead-testing
volume is expected to decrease by 10% next year. However, awareness of radon-related health hazards is
expected to result in a 6% increase in radon-test volume each year in the near future. Jim Rouse feels that if
he lowers his price for lead testing to $230 per test, he will have to face only a 7% decline in lead-test sales in
2023.
Required:
1. Prepare a 2023 sales budget for Rouse & Sons assuming that Rouse holds prices at 2022 levels.
2. Prepare a 2023 sales budget for Rouse & Sons assuming that Rouse lowers the price of a lead test to
$230. Should Rouse lower the price of a lead test in 2023 if the company’s goal is to maximize sales
revenue?
EXERCISE 2: Budget of Production
The Howell Company has prepared a sales budget of 43,000 finished units for a 3-month period. The
company has an inventory of 11,000 units of finished goods on hand at December 31 and has a target finished
goods inventory of 19,000 units at the end of the succeeding quarter.
It takes 4 gallons of direct materials to make one unit of finished product. The company has an inventory of
66,000 gallons of direct materials at December 31 and has a target ending inventory of 56,000 gallons at the
end of the succeeding quarter. How many gallons of direct materials should Howell Company purchase during
the 3 months ending March 31?
Exercise 3: Job Costing & budgeted manufacturing overhead
The Dougherty Furniture Company manufactures tables. In March, the two production departments had
budgeted allocation bases of 4,000 machine-hours in Department 100 and 8,000 direct manufacturing laborhours in Department 200. The budgeted manufacturing overheads for the month were €57,500 and €62,500,
respectively. An excerpt from the accounting records for the month of March shows the following actual costs
incurred in the two departments:
Department 100
Direct materials purchased on account
€110,000
Direct materials used for Job A
32,500
Direct manufacturing labor used for Job A
52,500
Indirect manufacturing labor
11,000
Indirect materials used
7,500
Lease on equipment
16,250
Utilities
1,000
Department 200
€ 177,500
13,500
53,500
9,000
4,750
3,750
1,250
Job A incurred 800 machine-hours in Department 100 and 300 manufacturing labor-hours in Department 200.
The company uses a budgeted overhead rate for applying overhead to production.
Required:
MCFM_FC&PM (Sessions 2+3) – QUESTIONS of Exercises & Problems (W2024)
44 sur 59
8 - 11
a. Determine the budgeted manufacturing overhead rate for each department.
b. Provide possible reasons why Hill Manufacturing uses two different cost allocation rates.
c. What is the total cost of Job A?
EXERCISE 4: Cash Budget Forecast
Oxbridge Corporation’s forecast for the next few months shows:
Month
February
March
April
May
June
Sales revenues ($000)
500
600
400
200
200
Operating expenses ($000)
400
300
600
500
200
You are advised that operating expenses include $ 8,000 of depreciation every month. 30 % of sales are for
cash. Of the credit sales, 75 % are collected in the month following sale and the remaining 25 % are collected
2 months after the sale. Operating expenses are paid in the month they are incurred.
The firm wishes to maintain a minimum ending cash balance of $ 25,000. Any deficit would be financed
through short-term bank borrowing.
Required:
a- Prepare a cash budget for April, May and June, assuming opening cash balance of $ 115,000 on 1st
April (Ignore interest and taxation).
b- What is the minimum financing needed, if any, during this period?
c- If a pro-forma balance sheet were produced for the end of June, what would be the amounts for:
Cash, Notes payable (short term borrowings) and Accounts receivable?
EXERCISE 5: Master Budget
The Kitchen Marvel Company (KMC) is a local retailer of a wide variety of kitchen and dining room items. The
company rents a retail store in a midsized community near a large metropolitan area. KMC’s management
prepares a continuous budget to aid financial and operating decisions. For simplicity in this illustration, the
planning horizon is only 4 months, April through July. In the past, sales have increased during this season.
Collections lag behind sales, and cash is needed for purchases, wages, and other operating outlays. In the
past, the company has met this cash squeeze with the help of short-term loans from a local bank, and will
continue to do so, repaying these loans as cash is available.
Below is the closing balance sheet for the year just ending:
KMC Balance Sheet - March 31, 2016
Fixed Assets
Equipment, Fixtures, and other
$ 37,000
Accumulated Depreciation
Net Fixed Assets
(12,800)
$ 24,200
MCFM_FC&PM (Sessions 2+3) – QUESTIONS of Exercises & Problems (W2024)
45 sur 59
9 - 11
Current Assets
Cash
10,000
Accounts Receivable
16,000
Merchandise Inventory
48,000
Prepaid Insurance
1,800
Total Current Assets
Current Liabilities
Accounts Payable
(1/2 x March purchases of $ 33,600)
Accrued wages & commissions payable
($ 1,250 + $ 3,000)
Total Current Liabilities
75,800
16,800
4,250
(21,050)
Net Assets
$78,950
Financed by: Owners’ Equity
$78,950
Sales in March were $ 40,000. Monthly sales are forecasted as follows:
April
May
June
$ 50,000
80,000
60,000
July
$ 50,000
August 40,000
Management expects future sales collection to follow past experience: 60% of the sales should be in cash and
40% on credit. All credit accounts are collected in the month following the sales. The $ 16,000 of accounts
receivable on March 31st represent credit sales made in March (40% of $ 40,000). Uncollectible accounts are
negligible and are to be ignored. Also ignore all local, state and federal taxes.
Because deliveries from suppliers and customer demands are uncertain, at the end of each month KMC wants
to have on hand a basic inventory of items valued at $ 20,000 plus 80% of the expected cost of goods sold for
the following month. The cost of merchandise sold averages 70% sales. The purchase terms available to KMC
are net 30 days. It pays for each month’s purchases as follows: 50% during that month and 50% during the
next month. Therefore, the accounts payable balance on March 31 is 50% of March’s purchases, or $ 33,600 x
.5 = $ 16,800.
KMC pays wages and commissions semi-monthly, half a month after they are earned. They are divided into
two portions: monthly fixed wages of $ 2,500 and commissions equal to 15% of sales, which we will assume
are uniform throughout each month. Therefore, the March 31 balance of accrued wages and commissions
payable is (0.5 x $ 2,500) + 0.5 (0.15 x $ 40,000) = $ 1,250 + $ 3,000 = $ 4,250. KMC will pay this $ 4,250 on
April 15.
Other KMC’s monthly expenses are:
Miscellaneous expenses
Rent
Insurance
Depreciation
5% of sales, paid as incurred
$ 2,000, paid as incurred
$ 200 expiration per month
$ 500 per month
MCFM_FC&PM (Sessions 2+3) – QUESTIONS of Exercises & Problems (W2024)
46 sur 59
10 - 11
KMC bought new fixtures for $ 3,000 cash in April. The depreciation for these fixtures is included in the $500
monthly depreciation.
The company wants a minimum of $ 10,000 as a cash balance at the end of each month. Management plans
to borrow no more than necessary and to repay as promptly as possible. Borrowings and repayments occur at
the end of the month. Interest is paid, under the term of the credit arrangement, every quarter in March, June,
September and December. The interest rate is 12% per year.
Required
Using the data given, prepare the following detailed schedules for each of the months of the planning horizon
(step 1), then use these schedules to prepare a budgeted income statement for the 3 months ending July 31st
2016.
Use the previous schedules and the provided additional data to prepare the forecasted financial statements
(step 2)
Step 1 - Operating budget
a) Sales budget
b) Cash collection from customers
c) Purchases budget
d) Disbursements for purchases budget
e) Operating expenses budget
f) Disbursement for operating expenses budget
Ä Prepare the budgeted income statement
Step 2 – Financial budget
g) Cash budget including details of borrowings, repayments, and interest for each month of the planning
horizon
h) Budgeted balance sheet as of July 31st 2016.
MCFM_FC&PM (Sessions 2+3) – QUESTIONS of Exercises & Problems (W2024)
47 sur 59
11 - 11
48 sur 59
Global Advanced Research Journal of Management and Business Studies Vol. 1(4) pp. 115-125, May, 2012
Available online http://garj.org/garjmbs/index.htm
Copyright © 2012 Global Advanced Research Journals
Full Length Research Paper
Management Accounting Change in the Portuguese
Telecommunications Industry
Maria João Martins Ferreira Major
Associate professor Maria Major at ISCTE – Lisbon University Institute and BRU/UNIDE researcher, Avenida das
Forças Armadas, 1649-026 Lisbon, Portugal, Europe.
Email: maria.joao.major@iscte.pt; Phone number: +351/217903495
Accepted 014 April, 2012
This paper sought to study the reasons that explain why has a telecommunications operator (called
Marconi) changed its traditional management accounting systems (MAS) and replaced it with activity-based
costing (ABC). The paper relied on qualitative data collected through a longitudinal and in-depth case study
in the telecommunications sector. The investigation was informed by new institutional sociology (NIS)
insights. The study evidenced that Marconi adopted ABC in order to fulfil its constituencies’ expectations
of efficiency created with the reorganisation of the Portuguese telecommunications sector and the
introduction of competition in the market. Furthermore, the paper contests the managerial emphasis that
ABC has been subject to and claims that social accounting theories, such as institutionalism, should be
adopted by management accounting researchers in order to achieve a deeper understanding of the ‘ABC
phenomenon’.
Keywords: Management accounting change,
liberalisation, New Institutional Sociology.
Activity-Based
Costing,
Portuguese
telecommunications
INTRODUCTION
This paper reports a case study conducted in a
Portuguese
telecommunications
company
(called
Marconi) providing long telecommunications services that
has adopted an activity based approach. Especially since
the publication of diverse case studies by Cooper and
Abbreviations
ABC: Activity-based Costing; EC: European Commission;
EU: European Union; ICP: Portuguese Communications
Institute;
MA:
Management
Accounting;
MAS:
Management Accounting Systems; NIE: New Institutional
Economics; NIS: New Institutional Sociology; OIE: Old
Institutional Economics; TDP: Teledifusora de Portugal;
TLP: Telefones de Lisboa e Porto; TP: Telecom Portugal.
Kaplan through the Harvard Business School in the
1980’s, Activity Based Costing (ABC) began to attract a
widespread interest both amongst researchers and
practitioners. It is said that ABC emerged in response to
the recognition that traditional management accounting
system (henceforth designated by MAS) were generating
misleading costing data and that were not providing
useful information to support managers decision-making
within the new business environment (Johnson and
Kaplan, 1991; author, 2007). The relevance of ABC was
particularly emphasised when in 1987, Johnson and
Kaplan published “Relevance Lost – The Rise and Fall of
Management Accounting”, in which it was claimed that
traditional MA (herein used to denominate management
accounting) information is “too late, too aggregated, and
too distorted to be relevant for managers’ planning and
49 sur 59
116 Glo. Adv. Res. J. Manag. Bus. Stud.
control decisions” (1991, p. 1). After some years of
enthusiasm towards this approach, several case studies
of ABC implementation, documenting difficulty and failure
have been reported (see for example, Malmi, 1997; Major
and Hopper, 2005; Bhimani and Pigott, 1992; Cooper et
al., 1992; Anderson, 1995; Friedman and Lyne, 1999)
and some reservations about its effective value have
been pointed out by a certain number of management
accounting researchers (Baird et al., 2004; Armstrong,
2002; Hopper, 1994; Jones and Dugdale, 2002; Soin et
al., 2002). Those reservations concern basically three
types of issues (Innes et al., 2000; Major and Hopper,
2005): firstly, whether ABC is more than just a fad or
fashion and whether it represents real technical
enhancement rather than a bandwagon effect (Gosselin,
1997; Malmi, 1997; Jones and Dugdale, 2002); secondly,
the recognition that ABC only generates relevant costing
information in supporting decision making when applying
certain restrictive conditions (Noreen, 1991; Datar and
Gupta, 1994) and thirdly, that its implementation is costly
and behavioural factors are determinant to its success
(Shields, 1995; Englund and Gerdin, 2008; Shields and
Young, 1989; author, 2007; Baird et al., 2004). This
paper contests the managerial emphasis that ABC has
been subject to, which the researcher believes is too
restrictive and insufficient to address effectively all the
complexities of the ‘ABC phenomenon’. Instead, the
researcher claims that institutional theory might
contribute to obtaining a more fundamental theoretical
and concrete analysis than is being offered by
mainstream accounting about ABC. Studies to date
suggest that ABC in practice might differ from the way is
portrayed in textbooks and that it is likely that after being
implemented to threaten “existing managerial structures
of power and control and possibly threaten managerial
livelihoods” (Hopper, 1994, p. 487). Also, there has been
a call for more intensive case study research, supported
by the use of social theory accounting in order that ABC’s
contextual and intrinsic complexities may be addressed
effectively (Hopper, 1994; Armstrong, 2002; Soin et al.,
2002; Lukka and Granlund, 2002; Baird et al., 2004). This
paper is an attempt to address such calls and aims to
contribute to increase understanding of the motivations
that drive companies to begin organisational change and
in particular to adopt activity based techniques.
A discussion of the basic assumptions of new
institutional sociology (NIS) follows, which is the branch
of institutional theory adopted to explain why Marconi has
adopted ABC. The main reservations towards ABC
relevance will likewise be presented. The paper
continues with the description of the research method
followed in this investigation and with the presentation of
the company. It then moves to the discussion of the case
study conducted in Marconi informed by NIS perspective.
The paper concludes with the presentation of
conclusions.
New Institutional
Analysis and ABC
Sociology
in
Organisational
Conventional accounting wisdom is grounded on the
assumptions of the neoclassical economics theory of the
firm, which assumes that firms seek to maximise their
profit and that organisational actors operate with perfect
knowledge of reality (Baxter and Chua, 2003;
Wickramasinghe and Alawattage, 2007). For a long time,
management accounting research was more concerned
with what economically-rational managers should do,
rather than what managers were observed to do
(Scapens, 1994; Ryan et al., 2002). This technical and
prescriptive perspective of accounting had identified
research before its actual emphasis on behavioural,
social and political issues (Hopper and Major, 2007;
Roberts and Scapens, 1985; Carruthers, 1995;
Wickramasinghe and Alawattage, 2007). Nowadays, it is
commonly accepted by researchers that accounting “is
not a neutral device that merely documents and reports
the ‘facts’ of economic activity” (Miller, 1994, p. 1). In
opposition accounting has come to be considered as a
social and institutional practice (Miller, 1994; Carruthers,
1995; Wickramasinghe and Alawattage, 2007) and,
therefore, sociological / organisational theories are being
used to help the researcher to make sense of
management accounting practice (Baxter and Chua,
2003; Berry and Otley, 2004). Management accounting
researchers have been adopting the institutional theory to
explain and make sense of accounting practice,
especially during the last three decades (Moll et al.,
2006). Different branches of institutional theory have
been used in accounting research, namely the new
institutional economics (NIE), new institutional sociology
(NIS) and the old institutional economics (OIE) (Dillard et
al., 2004; Moll et al., 2006). These approaches are
substantially different both in their intellectual roots and
methodological issues, and their choice should depend of
the ‘research purpose at hand’ (Moll et al., 2006).
NIS applied to organisational analysis is a relatively
recent phenomenon. It was only in the 1970’s that new
conceptions focused on the cultural and social aspects of
organisations and on their institutional environments
emerged (Scott and Meyer, 1991; Scott, 2008;
Greenwood et al., 2008). Since then NIS has been used
repeatedly in empirical investigations (see for instance,
Galaskiewicz, 1991; Flingstein, 1991; Dacin and Dacin,
2008; Davis and Anderson, 2008). Neoinstitutionalists are
unanimous in their belief that the structure and behaviour
of an organisation depend on the characteristics of the
environment in which it operates. Scott and Meyer (1991)
pointed out that “organizations are embedded in larger
systems of relations” (p. 120) that they denominated by
‘societal sector’. They define societal sector as the group
of organisations providing similar services, products or
functions, including its major suppliers, customers,
50 sur 59
Major 117
owners, regulators, competitors, etc. This concept was
termed by DiMaggio and Powell (1991b) as
‘organizational field’. It is said that these systems are
organised at broader and wider levels and that
organisations are connected into nonlocal and vertical
hierarchies. The way this sector is structured significantly
affects organisational features (Scott and Meyer, 1991;
Scott, 2008). In sum, NIS is based on the belief that
organisational structures are shaped by their social
environment and that environments made organisations
in their own image. However, this similarity between the
inside and outside of organisations denominated by
‘isomorphism’ is not determined by technical criteria.
Instead, formal organisational structures arise as
reflections of rationalised rules that function as myths and
give legitimacy and stability to organisational projects
(Meyer and Rowan, 1991). As Carruthers (1995) pointed
out, the process of isomorphism “is a cultural and political
one that concerns legitimacy and power much more than
efficiency alone” (p. 315). This often means that political
and cultural issues are hidden under a technical surface.
Four types of isomorphism can be distinguished
(DiMaggio and Powell, 1991b): competitive, coercive,
mimetic and normative. Competitive isomorphism occurs
when the forces of competition will eventually impose
upon organizations one single best way of doing things
(Carruthers, 1995). This type of isomorphism, according
to DiMaggio and Powell (1991b) gives only a partial
picture of the modern world of organisations and, hence,
should be complemented by an institutional view of
isomorphism. Coercive, mimetic and normative
isomorphisms were developed under this institutional
view and stress cultural and political issues as the drivers
of change. The former type of institutional isomorphism is
the result of organisational external pressure on
dependent organisations and of general expectations
developed in the environment in which organisations
develop their activities. Scott (1991) suggested that two
types of impositions should be distinguished under this
category: imposition by means of authority and imposition
by means of coercive power. Accordingly, changes
imposed by authority are met with less resistance and
faster than those imposed by force. Moreover, structural
changes associated with authority are expected to
achieve higher levels of compliance and stability since
these changes are less superficial than change imposed
using coercion. If coercive isomorphism derives from
coercive authority, mimetic isomorphism on the other
hand, is driven by uncertainty and imitation processes.
Accordingly,
uncertainty
about
organisational
technologies, goals and environment’s expectations often
leads to the modelling of organisations on other kindred
organisations. It seems that organisational fads and
fashions are likely to spread through this particular type
of isomorphism (Carruthers, 1995). Organisations tend to
copy models of operation from successful companies and
to be receptive to fashionable business techniques, as
might be the case with ABC, to protect them from
uncertainty (Granlund and Lukka, 1998; Abrahamson,
1991, 1996). Finally, normative isomorphism is based on
the recognition that professions play an important role in
the diffusion of similar orientations and dispositions in
shaping organisational behaviour. This process takes
place through the legitimacy that formal education
confers and through the development of professional
networks that span organisations. Hence, organisational
change in NIS occurs as result of the organisation’s
conformation to its institutional external environment in
order to increase the organisations’ chances of survival.
Scott and Meyer (1991) alleged that when occurring
structural change is often very difficult to distinguish from
technical and institutional drivers since those who
formulate institutional rules strive to make them appear
technical. To the extent that rules are considered proper,
adequate and rational, organizations must incorporate
them to avoid illegitimacy. As Carruthers (1995) claimed
“being technically efficient is not the only path to
organizational survival. Achieving legitimacy in the eyes
of the world, state, powerful professions, or society at
large, is another effective survival strategy” (p. 317). The
incorporation of legitimised elements increases the
commitment of internal participants and external
constituents to organisational actions and protects
organisations from having their conduct questioned.
Nevertheless, because inadequacies often arise between
organisational efficiency demands and prescriptions of
generalised myths, formal organisational structures are
decoupled from actual organisational practices and a
logic of confidence and good faith is displayed, internally
and externally (Meyer and Rowan, 1991). This
organisational formal structure was described as
“mythical and ceremonial, a kind of symbolic windowdressing” (Carruthers, 1995, p. 315).
In summing up, traditionally neoinstitutionalists affirm
that organisations are a reflection of their environments
and external institutional demands and that when
organisations do not accommodate the environment’s
expectations they would not survive. This convergence
between organisations and their environments emerged
from the search for legitimacy. The constituents that exert
such isomorphic pressure are vast and include such
institutions as shareholders, regulator, state, public
opinion and capital markets (Granlund and Lukka, 1998;
Hopper and Major, 2007; Wickramasinghe and
Alawattage, 2007). In this sense, the adoption of ABC or
of any other managerial technique, which have gained
the image of boosting organisational performance would
legitimise organisations’ activities within their operating
environments (Soin et al., 2002; Hopper and Major,
2007).
Although activity costing was earlier referred to by
Staubus (1971) its popularity was due mainly to its
application in a few US companies in mid 1980’s and to
the publicity of these experiences through the publication
51 sur 59
118 Glo. Adv. Res. J. Manag. Bus. Stud.
of several cases studies by Cooper and Kaplan (Jones
and Dugdale, 2002). ABC emerged as a result of the
recognition that traditional MA was inappropriate in the
current business environment and that often decisionmakers were provided with inaccurate cost information
(Johnson and Kaplan, 1991; author, 2007). It has been
alleged that conventional MAS lagged behind
manufacturing technology changes and that management
accounting was no longer providing relevant information
for supporting managers in their decision-making task
(ibid). It was argued that the cost accounting systems in
use had lost their former relevance by the 1980’s
(Johnson and Kaplan, 1991) and that management
accounting should return to basics, “working closely with
design and process engineers, operations managers, and
product and business managers” (Jonhson and Kaplan,
1991, p. 261). After that first stage of huge excitement
towards the potential of the approach where success
cases were widely publicised and emphasised, several
case studies reporting ABC implementation difficulty and
failure have begun to appear (Major and Hopper, 2005;
Malmi, 1997; Anderson, 1995; Bhimani and Pigott, 1992;
Soin et al., 2002; Friedman and Lyne, 1999; Baird et al.,
2004). If ABC literature until two decades ago was replete
with methodological and operational issues (Cooper,
1988a, 1988b, 1989a, 1989b, 1990) it is now concerned
with the study of organisational and behavioural topics
both associated with the process of ABC implementation
and with its impact on organisations and individuals
(Major and Hopper, 2007; Soin et al., 2002; Baird et al.,
2004; Gosselin, 1997; Wickramasinghe and Alawattage,
2007; Armstrong, 2002; Lukka and Granlund, 2002;
Englund and Gerdin, 2008).
ABC cannot be therefore understood as a panacea that
solves all costing problems. Today, there is some
evidence from empirical studies that ABC can generate
dysfunctional consequences within organisations,
perhaps because as Hopper argued (1994, p. 487)
“systems perceived by managers to be potentially
threatening can be rendered unworkable through
managerial biasing and manipulation of data”.
Furthermore, some researchers have questioned whether
ABC is anything more than a fashion or fad (Innes et al.,
2000; Jones and Dugdale, 2002; author, 2007). Often,
the managerial techniques proposed by management
fashion setters even if they look like innovations and
improvements relative to the state of the art they are only
old business practices reinvented (“old wine in new
bottles”). This might be the case of ABC considering
Johnson and Kaplan’s (1991) historical account of MA
development. They claimed that in the beginning of the
twentieth century the engineers and managers of big US
manufacturing companies were using similar managerial
techniques to ABC to allocate costs to products. ABC
rhetoric aims to convince fashion followers that they must
pursue efficiency goals and that the right means to attain
those goals is through the adoption of activity based
techniques (Wickramasinghe and Alawattage, 2007;
Jones and Dugdale, 2002; author, 2007). Despite studies
on ABC adoption in firms (e.g. Soin et al., 2002; Major
and Hopper, 2005; Baird et al., 2004; Hopper and Major,
2007) further research is needed for researchers to
comprehend whether ABC is merely a management
fashion or if, on the contrary, it constitutes a true
alternative to traditional costing systems offering real
benefits to managers.
RESEARCH METHODS
This paper is supported by a case study conducted over
12 months in a Portuguese telecommunications
company, which has followed the six steps of case study
design suggested by Ryan et al. (2002): preparation,
collecting evidence, assessing evidence, identifying and
explaining patterns, theory development and report
writing. The case study here reported followed an
explanatory research model since theory was used to
help the researcher make sense of the observed
accounting practices. Thus, was not intended through this
case study generate theory. This research format seems
to be the most appropriate when research questions are
focused mainly on “why” questions, as is the situation in
this particular case study (Yin, 2009; Berry and Otley,
2004). The research questions posed by the researcher
were the following: firstly, why Marconi has changed its
MAS and secondly, why ABC was adopted. Different
sources of information were used, including interviews,
observations and documentary analysis, in order to
facilitate triangulation (Yin, 2009; Ryan et al., 2002). Both
in the pilot and main study a semi-structured format was
adopted to conduct interviews. Nevertheless, every time
the researcher felt that something not covered in the
previous plan was worth exploring, alterations to the
guide were made Also, interviewees were encouraged to
speak freely their feelings and thoughts about the
changes that had occurred in both Marconi and the
Portuguese telecommunications market. About 52
interviews (20 interviews in the pilot study plus 32 in the
main study) were conducted over a 71 hour period. Indepth and face to face interviews were carried out with
several managers from the operational departments of
Marconi with different interests and involvements with its
MAS. In total 20 of Marconi’s managers and employees
were
interviewed.
Also,
the
Portuguese
telecommunications regulator, the consulting firm that
was responsible for ABC implementation in both Marconi
and its parent company, and some managers from
Marconi’s parent company were interviewed. Apart from
the interviews conducted in these organisations,
documentary evidence was collected, namely Portugal
Telecom’s and the Portuguese telecommunications
regulator annual reports; Likewise several laws about
telecommunications regulations were gathered. All the
52 sur 59
Major 119
interviews were tape recorded and then, fully transcribed,
excluding the following ones: the two first in the pilot
study where matters concerning access to data were
discussed with Marconi’s managers, and two interviews
conducted in the main study on two of its engineers, who
refused to be tape-recorded. Marconi’s departments in
which managers and employees were interviewed were
the following: the two commercial divisions (Consumer
Markets department and Carrier Services and Network
Planning department), the production division
(Telecommunications Infrastructure department), the
Planning and Control department and the Finance and
Administration
department.
Because
the
Telecommunications Infrastructure department has an
important role in periodically feeding the ABC system, its
operational centres of satellites (in Sintra), submarine
cables (in Sesimbra), and Commutation (in Linda-aVelha) all situated in the outskirts of Lisbon, were visited,
and interviews were conducted with several of its
employees and managers. In Marconi several documents
were obtained, namely its annual reports from 1990 till its
fully integration in Portugal Telecom in 2002, financial
reports, telecommunications market analysis, dictionary
of activities, notes from the consultants and other similar
data. Besides this, the researcher gathered newspapers’
interviews with the actual and previous board of directors
from Marconi and Portugal Telecom and other articles
about the telecommunications market both in Portugal
and worldwide.
Marconi
Marconi was a Portuguese telecommunications company
operating in the long distance telecommunications
business and founded in 1925. Until the end of the 1990s
this company was operating in a monopoly regime and,
hence, was not facing true market competition. This fact,
associated with the nature of its business, has
contributed to turn Marconi in one of the most healthy
and profitable Portuguese companies. Also, Marconi has
acquired an engineering prestigious image both in
Portugal and overseas by the expertise of its activity.
Until 1974 This was the year of the ‘Revolution of April’,
which led to the end of the 13 year colonial war between
Portugal and the African colonies and to the
independence of those countries.
The activity of the company was mainly supported by
the telecommunications traffic between the Portuguese
ex-colonies in Africa, namely Angola, Mozambique,
Guinea-Bissau, Cape Verde and S. Tome and the
‘mainland’. After the revolution, Marconi’s strategy was
based on its internationalisation through the development
of programmes worldwide, which was supported by its
technological modernisation in satellite and submarine
cables. At the end of 1980’s Marconi decided to move
into new businesses, which encompassed not only
telecommunications services but also the following new
business areas: information systems; the electronics
industry; financial services and property. At the same
time, Marconi sought to enlarge its activities in the
telecommunications business. Hence, inroads were
made to new telecommunications areas, namely into the
public telecommunications (both local and international)
outside
Portugal,
maritime
mobile
services,
telecommunications engineering, telephone and business
directories, TV broadcasting, corporate communications,
value added services and research and development. As
result, Marconi became an important national economic
group in the Portuguese economy at the end of 1980’s
and in the early years of 1990’s.
From the beginning of the 1990’s, the Portuguese
government started a reorganisation programme of the
whole telecommunications sector following the decision
of the European Community to liberalise the
telecommunications market in its member states. This
decision was a result of the worldwide trend of fully
deregulating telecommunications markets. The aims of
the reorganisation of the Portuguese telecommunications
sector were threefold: (1) First, it intended to create
adequate conditions for the introduction of full
competition; (2) Second, it sought to prepare the market
to the installation of new operators; (3) Finally, it aimed to
restructure the ‘old’ public operators. Until this
reorganisation, the Portuguese telecommunications
market comprised several public concessionaires of
medium size with mixed capital, each of those companies
focusing on a particular core business. These public
concessionaires were the following: Telecom Portugal
(TP), which was created in 1992 after having been
separated from CTT (a company that was providing both
mail and national telecommunications services);
Telefones de Lisboa e Porto (TLP), whose business was
to provide local and regional fixed telephone services in
the areas of Lisbon and Oporto; Marconi, whose core
business was the intercontinental telecommunications
services; Telepac, whose business was switching data
transmission and Teledifusora de Portugal (TDP), which
was accountable for managing the network and
broadcasting TV signals. These companies were under
the jurisdiction of the Portuguese government, specifically
the Ministry of Public Works, Transportation and
Communication, and supervised by the Portuguese
Communications Institute (ICP) These days the regulator
is called ‘ANACOM’ Despite the fact that ICP’s origins are
traced to the 1980’s, its role as a telecommunications
regulator was mainly felt by operators after the
Portuguese telecommunications sector was reorganised
in the mid 1990’s.
Throughout
the 1990’s
several changes were
53 sur 59
120 Glo. Adv. Res. J. Manag. Bus. Stud.
introduced in the Portuguese telecommunications market,
which have drastically affected Marconi’s business
activity. Firstly, in 1994, Portugal Telecom (PT) was
created as result of the merger between the public
operators TP, TLP and TDP. Secondly, in 1995, Portugal
st
Telecom was privatised (1 phase) with the aims of both
restructuring the Portuguese telecommunications market,
opening it up to private both national and international
investors and of increasing its internationalisation and
competitiveness. Thirdly, in 1995 Marconi was integrated
in PT, which was constituted as an economic group
encompassing several businesses all related with
telecommunications services. In consequence of
Marconi’s integration in the Portugal Telecom Group, this
company transferred all its non-core businesses and
financial investments abroad to the parent company. On
the other hand, PT transferred to Marconi the
telecommunications traffic business with Europe and
North Africa. Therefore, in this way Marconi became the
single public provider of international telecommunications
services, but ‘in compensation’ lost all its other
businesses, including its physical and human resources
to the parent company. The political idea underneath to
the integration of Marconi in PT was that Portugal should
be provided with a strong telecommunications group, in
order to compete successfully with both internal and
external telecommunications operators as happened in
other European countries. Marconi kept its autonomy
from PT, but its integration had affected its daily life in
multiple ways. With the reorganisation of the Portuguese
telecommunications sector, both PT and Marconi began
a full programme of organisational change. External
consultants were called in and several managerial
projects were launched. In concrete, Marconi had
implemented the following projects, which mainly affected
its MA and informational systems: (1) Revision of its
strategic plan; (2) Implementation of a new career
evaluation system, including the preparation of a scheme
to periodically assess employees’ motivation and work
satisfaction; (3) Adoption of strategic control benchmarks;
(4) Development of programmes to create staff
awareness about the competitiveness of the business
environment surrounding Marconi; (5) Implementation of
EIS – Executive Information System, which aimed to
provide senior managers with a set of operational and
strategic information; and (6) Adoption of ABC. From all
the projects introduced in the company the adoption of
ABC was the major one, not only judging by the human
and financial resources allocated but also by the time and
importance allocated by Marconi’s top managers to this
project. In 1997 Marconi, with the help of external
consultants, began the implementation of ABC
throughout the whole company and in March 1998 the
first results were obtained and discussed amongst the
managers. In mid 2000 ABC was fully implemented and
data was being regularly provided to both Marconi’s
managers and Portugal Telecom.
Why has Marconi Changed its MAS?
This section aims to explain the reasons that led Marconi
to change its MAS supported by NIS theory.
Neoinstitutionalists claim that organisations are shaped
by their environments and that in order to survive they
are forced to follow the expectations of their
constituencies (DiMaggio and Powell, 1991a, 1991b;
Scott and Meyer, 1991; Scott, 2008; Greenwood et al.,
2008). It is argued here that Marconi has changed its
MAS in order to accommodate internal and external
expectations about its role within the new business
environment characterised by tough competition.
Changing its MAS was one of the means that the
company has found to legitimise its actions to its
shareholders, managers, regulator, parent company and
the public, and a means to guarantee its survival.
Yet competition was fully introduced in the Portuguese
telecommunications market from 1st January 2000,
according to EC decision of liberalising European
telecommunications sector, until 2003. Already at the
beginning of the 1990’s deregulation was publicly
discussed and operators were perfectly aware of the
huge challenges that they were soon going to face. On
the other hand, Marconi’s managers were not satisfied
with the MAS that the company had adopted in 1992,
since the system was providing managers with costing
data too late and in order to be feed overburdened them
with informational demands. 1992’s cost accounting
system was adopted by the initiative of Marconi’s finance
general director in order to support managers in both
pricing and cost control strategies. Marconi’s top
managers were aware that the company would soon be
losing its monopoly and facing tough competition and that
it could not continue charging such high prices as in the
past. Hence, during 1992 the first rationalisation of
activities and cost control occurred. A policy of reducing
telecommunications prices was introduced by Marconi
since 1992 in order to improve its competitiveness within
the telecommunications market. Considerable reductions,
in some cases of more than 50%, have occurred in the
price of Marconi’s calls. Therefore, it is contended here
that the information demands of Marconi’s managers
were one of the drivers that led the company to change
its previous MAS and to replace it with a more
‘sophisticated system’ in 1997. If Marconi did not change
its MAS, managers would tend to withdraw their
involvement and motivation from company’s strategies,
and would allege that without an adequate MAS they
could not follow satisfactory pricing and cost control
strategies, and hence, that they were not responsible for
Marconi’s failure within the new business context. In this
sense, it can be argued that MAS may be seen more as a
‘hygienic factor’ than a source of strategic or competitive
advantage (Granlund and Lukka, 1998).
However, besides managers there were other
constituencies that led Marconi to change its MAS. One
54 sur 59
Major 121
of the most important constituencies that have pressed
Marconi to change its MAS was the Portuguese
telecommunications regulator, through Marconi’s parent
company (PT - Portugal Telecom). Because Marconi was
integrated within Portugal Telecom it did not maintain a
direct relationship with the regulator. As a PT manager
explained:
“Marconi doesn’t have direct relations with the
Portuguese regulator. Marconi has signed with PT a subconcession contract to explore the international
telecommunications business. The concession contract is
between the state and PT. This way, Marconi only has to
send cost information to PT, which is consolidated with
those of PT and than sent to the regulator…”
Therefore, Marconi’s information systems needed to be
integrated with those of PT, in order to allow PT to
periodically send the regulator the costing data imposed
by, as will be explained below, both its concession
contract and PT’s ‘status’ of operator with ‘significant
market power’ Those operators who hold a share equal
to, or more than 25% of the market in relation to circuit
leasing, fixed telephone service and fixed telephone
networks.
The Portuguese telecommunications regulator acquired
substantial importance during the process of introduction
of competition into the market. Its functions encompassed
a wide range of activities, which might be summarised in
three major tasks: (1) government advisement, (2) market
regulation, and (3) technical assignment. In order to
create conditions for true competition between the new
operators and the established operators, legislation was
laid down, pertaining especially to the ‘operators with
significant market power’, with specific information
obligations. In general, this legislation followed European
Community directives, laid down by the commission with
the aim of creating the conditions for the establishment of
real competition within the European telecommunications
market. The law-decree 290-A/99 dated 30 July pointed
out that operators considered to have significant market
power were obliged to:
“a) Guarantee to all users, unrestricted access to the
leased circuits, in conditions of equality, transparency
and impartiality;
b) Provide information on the provision and utilisation of
the leased circuits, whenever requested by ICP [the
Portuguese telecommunications regulator];
(…)
d) Possess separate accounting for the activities of
establishment or provision of public telecommunications
networks, on one hand and the other activities on the
other. The latter shall include the services provided to the
body itself and those provided to other bodies;
e) Implement a system of cost accounting in
accordance with the provisions in the present Regulation;
f) Observe the quality levels established for them by
ICP.”
Thus, the operators with significant market power, as is
the case of Portugal Telecom, were obliged amongst
other requirements to implement a system of cost
accounting appropriate to provide the information
demands of the regulator. Moreover, law-decree 474/99
of 8 November fixed that the operators of fixed telephone
networks, and fixed telephone services providers, which
had significant market power, should implement an
analytical cost accounting system. This served the
application of the tariff principles of equality, transparency
and non-discrimination. It was aimed that PT, which has
been the concessionaire of public telecommunications
services for 15 years, based its price system on the
services provided, exclusively in the context of the
concession, following the principles described in article
30 of law-decree 40/95 of 15 February, which were:
“a) Cost orientation for the service provision, duly
justified by an analytical accounting system;
b) Non-discrimination in its application, ensuring that all
users in equal circumstances are conferred an equal
treatment;
c) Uniformity in the application of the tariff regime in
force for the services object of concession.”
In 1995, as result of all these regulations PT changed
its previous cost model and adopted a more sophisticated
cost accounting system, which would provided the
regulator with more detailed and accurate cost data. The
costing information demands of the regulator, mediated
by its parent company determined Marconi’s resolution to
(1) change its MAS and (2) to replace its ‘old’ MAS with a
similar system to that adopted by Portugal Telecom. In
other words, coercive isomorphism, as result of Portugal
Telecom and the Portuguese telecommunications
regulator’s pressure was one, of the most important
reasons to explain why Marconi decided to change its
MAS. However, this pressure, combined with Marconi’s
information demands and expectations of change
associated with the reorganisation of the company,
explained partially the reasons that motivated Marconi’s
top managers to adopt a new MAS. Pressures from other
external constituencies, such as Marconi / PT’s
shareholders and the capital markets, have also
contributed to cause such a change. Coercive
isomorphism, in this case generated by the creation of
expectations within public opinion towards the
improvement of Marconi and Portugal Telecom’s
competitiveness in the telecommunications market, has
induced Marconi / PT to alter their MAS. PT’s
privatisation and the necessity of creating good public
image, especially to potential shareholders, of a
successful and dynamic company might have also
influenced its top managers to adopt new managerial
tools, believed by constituencies as progressive, rational
and leading to success. PT was privatised in five phases,
which had occurred after 1995. The goal of this
privatisation was to get the participation in PT’s share
capital of a global strategic partner, and of several other
strategic partners within specific business areas, along
55 sur 59
122 Glo. Adv. Res. J. Manag. Bus. Stud.
with the general objective of dispersing the company’s
capital amongst private investors. This ‘public exposure’,
as a PT’s manager called it, has pressured PT and
Marconi to assure the public that they were making
substantial efforts to become more ‘modern’ and efficient.
Providing its shareholders with a better quality of
information through the improvement of its informational
systems was one of the means found to express such
efforts of ‘modernisation’ and to attract new shareholders
to the company. As Meyer and Rowan (1991) argued if
managers do not seem to use techniques that conform to
the norms of rationality it is likely that stakeholders’
expectations that companies are being well managed will
tend to be disappointed. As a consequence of their
disappointment their support will tend to be withdrawn
from organisations, augmenting the likelihood of
organisational failure.
To conclude, with the deregulation and introduction of
competition into Portuguese telecommunications market,
Marconi was expected by its constituencies to improve its
efficiency and performance. Additionally, the regulator in
order to assure the market that true competition was
introduced it was pressing those operators with
‘significant market power’ to provide it with detailed cost
data and hence, to up date their MAS. Marconi’s MAS
changes were then the result of such pressures and
expectations.
Why has Marconi Adopted ABC?
As was previously pointed out, neo institutionalists assert
that organisational constituencies expect managers to
use the most efficient means to achieve important ends.
Nevertheless, it is often ambiguous what constitutes the
right ends to be achieved and the means considered
most efficient (Abrahamson, 1991, 1996). It has been
argued that in such situations of uncertainty managers
legitimise their actions and decisions creating the
appearance that they are conforming to norms of
rationality (Meyer and Rowan, 1991; Scott, 2008;
Greenwood et al., 2008). Thus, frequently in such cases,
organisations tend to create the appearance of rationality
by adopting management techniques that are generally
believed by organisational stakeholders and other
constituencies to be rational and efficient means to
enhance organisational goals. In this paper it is argued
that Marconi / PT have adopted ABC in order to obtain
legitimisation from its constituencies, namely from the
regulator and shareholders. Since ABC has gained the
image of being up-to-date and the reputation of being a
strategic tool to any successful company (Granlund and
Lukka, 1998; Jones and Dugdale, 2002; author, 2007) its
adoption would guarantee its constituencies that Marconi
/ PT’s goals were being pursued efficiently.
In July 1997 Marconi, together with external
consultants began the ABC implementation process
throughout the company. As has been pointed out, the
previous Marconi’s MAS was not providing all the
detailed and accurate cost data its managers and the
regulator were demanding. Marconi’s decision to adopt
ABC was conditioned by PT’s decision of choosing ABC
as the cost model which could satisfy the Portuguese
telecommunications
regulator’s
cost
information
requirements. Therefore, to understand Marconi’s
adoption of ABC, we need to understand why PT had
taken the decision of implementing ABC and hence, it is
needed to move backwards to 1994 when PT was
created. PT was the result of joining TDP, TLP and TP,
companies that were descended from a clear ‘state
ownership mind set’. These companies did not have any
proper cost systems, mostly because they were
monopolistic companies that were not facing competition,
and hence, did not felt pressured to use costing data to
support investment decisions, to control costs and to
follow pricing policies, amongst other decisions. Budgets
were made annually, but with a ceremonial character,
which means that they were not prepared to be used as a
true management tool but to justify costs. Thus, when all
these companies were merged, and PT was formed, top
managers felt the need to develop more ‘sophisticated’
information systems, that would protect PT from being
criticised either from its regulator, managers, competitors
or other constituencies for not having a ‘proper’ MAS as
all ‘large and successful’ companies have. A manager
from the Portuguese telecommunications regulator
assessed PT’s (and TP’s) information system in this way:
“Even though PT, and TP, were very profitable
companies they had very weak informational systems.
Probably because these companies were very wealthy,
they did not need to be concerned with finding market
segments which were profitable… (…) They were earning
so much money that they did not need to control theirs
costs…”
At the same time, as was discussed before, the
regulator concerned in guarantee that the Portuguese
telecommunications market become an arena of genuine
competition, required that operators with significant
market power should follow cost orientation in their
pricing practices and that they should justify their costs,
providing the regulator periodically with detailed cost
data. PT, without any particular experience in cost issues,
and considering the complexity of its business, decided to
hire a specialised cost consultant by contacting one of
the largest international consultant firms, which has had
considerable experience in implementing ABC in US
telecommunications companies. As has been argued,
consultants have been contributing through mimetic
processes to the diffusion of the same solutions for
current managerial problems leading, to what Granlund
and Lukka (1998) described as “a small world of
management accounting practices” and “McDonaldism”.
As they contended (p. 167):
“Though the advice of consultants within the same
56 sur 59
Major 123
consulting firms may differ in different countries according
to the operational context, they nevertheless seem to
promote the same ‘standard solutions’ globally”.
ABC was, therefore, the approach that these
consultants advised PT’s top managers to implement in
order to get all the cost data required. A PT’s manager
explained how ABC was considered the right cost
approach to provide the regulator and its managers with
relevant cost data:
“I think that the people who decided to adopt ABC had
a relatively consensual opinion of the appropriateness of
this approach in supporting PT’s informational needs.
The problem it was facing was that ABC was a recent
approach… PT’s ABC implementation was the first one in
Portugal… Because ABC is compatible with traditional
information systems, we decided as a first stage to
develop it autonomously and laterally with the systems
we had here before”
Accordingly, ABC has been adopted by several other
telecommunications operators in Europe, especially by
incumbent operators, namely British Telecom in some of
its areas. ABC seems to be ‘institutionalised’ as the
appropriate cost approach to provide national regulators
with cost data in the telecommunications sector through
European Community legislation. In fact, the European
Commission laid down a recommendation on
‘Interconnection in a Liberalised Telecommunications
Market’ on the 15th October 1997. The preface pointed
out the importance of operators following the cost
oriented principle and hence, to implement separate cost
accounting systems in order to adequately price
telecommunications’ interconnections:
“(…)Recognising the bottleneck nature of the
incumbent’s fixed network and the lack of incentive to
provide efficient interconnection,
the European
Parliament and Council Directive on Interconnection in
Telecommunications imposes cost-oriented interconnect
pricing, together with requirements for appropriate
accounting separation. (…)”
This recommendation alleged that the cost accounting
systems which the operators need to adopt in order to
satisfy the telecommunications regulators should be
based ‘on current costs and activity-based accounts’, as
is transcribed below:
“The
Interconnection
Directive
requires
that
organisations
with
obligations for
cost-oriented
interconnection charges must implement cost accounting
systems which are capable of demonstrating that
interconnection charges do indeed follow the principles of
cost orientation and transparency. (…) The commission
is therefore recommending that NRAs [national regulatory
authorities for telecommunications] should set deadlines
for implementation by incumbent operators of new cost
accounting systems based on current costs and activitybased accounts.”
Thus, the European Commission clearly indicated that
ABC is the approach to be used, especially by the
telecommunications incumbents, to allocate the joint and
common costs to the cost objects. If at the beginning of
such a trend telecommunications operators were
experiencing uncertainty about the best MA they should
adopt and were, hence, recurring often to consultants to
support their decision, after 1997 with EC
recommendation mimetic isomorphism was replaced by
coercive isomorphic practices (DiMaggio and Powell,
1991b). Moreover, the researcher contends that EC and
national regulatory entities have identified and
recommended ABC combined with Long Run Incremental
Cost (LRIC) as the best accounting practices to the
operators with significant market power in the
determination of interconnection pricing because they
were expected to behave rationally in ‘solving the
problem’ of guaranteeing operators that true competition
was introduced into the market. However, this does not
mean that operators in fact have fixed the right prices of
interconnection services. Choosing ABC as the ‘right’
costing approach to support operators in their
interconnection prices strategies was the means found by
the regulator to legitimise its role in the sector as grantor
of competition. As Meyer and Rowan (1991) suggested,
the appearance of rationality is pursued through the use
of management techniques that are believed and
accepted by constituencies to be rational ways of
pursuing goals in order to avoid constituencies’ sanctions
and to get their support. ABC fulfilled all these demands
of rationality and progress within telecommunications
industry constituencies (Hopper and Major, 2007).
CONCLUSIONS
Since Harvard Business School published ABC case
studies in the 1980’s, Activity Based techniques have
been propagated by business mass media, management
gurus, consultants and business schools as a means to
enhance organisational efficiency and as an alternative
system to cover the limitations and pitfalls of conventional
management accounting (Jones and Dugdale, 2002).
ABC’s advocates have been emphasising how traditional
MAS are lagging behind the technological environment
advances and how its cost information has been distorted
to support their argument that ABC constitutes an
efficient managerial tool to support managers’ decisions
within the new business environment (ibid). The line of
reasoning that supports the alleged superiority of ABC
over the traditional MAS is based on the following two
prepositions: (1) firstly, that ABC enhances the accuracy
of product costing through the use of non-volume related
allocation basis; and (2) secondly, that it enables
managers to have a better understanding of the drivers of
costs. In a world marked by a strong emphasis on
efficiency and technique ABC, has easily gained the
status of superior management technique proper of
‘dynamic and successful’ organisations, even though until
57 sur 59
124 Glo. Adv. Res. J. Manag. Bus. Stud.
recently not much was known about its practicalities. It
may be argued that ABC incorporates institutional myths,
namely the myth of rationality, and hence it adoption may
be understood socially as providing legitimacy, resources
and stability to organisations and hence, enhancing
organisations’ survival prospects (Meyer and Rowan,
1991; Scott, 2008). To this regard DiMaggio and Powell
(1991b, p. 65) claimed that “as an innovation spreads, a
threshold is reached beyond which adoption provides
legitimacy
rather
than
improves
performance”.
Nonetheless, after the first phase of huge enthusiasm
towards ABC, some reservations about its effective value
in practice have been noted by some researchers. This
resulted from accounts of ABC failure throughout the
1990’s and 2000’s (e.g. Major and Hopper, 2005; Baird et
al., 2004; Malmi, 1997; Friedman and Lyne, 1999). This
paper is an attempt to address some of the claims
pointed out by ABC’s critics and to contribute to a better
and more integrated comprehension of the role of ABC
within the management accounting field. The managerial
emphasis that ABC has been subject to has been shown
and it has been argued that new institutional sociology
might contribute substantially to understanding the
causes that lead companies to adopt the activity based
approach. Furthermore, the researcher argued that one
needs to encompass more than technical issues to
comprehend the reasons that motive organisations to
change their MAS and to replace them with activity based
techniques. As has been pointed out the real drivers of
organisational change are often political or cultural
issues, which are covered by technical issues (Scott,
2008; DiMaggio and Powell, 1991a; Meyer and Rowan,
1991). Moreover, the incorporation of managerial
techniques, which have become institutionalised within
business audiences as bringing efficiency into
organisations, as is the case of ABC, “quite apart from
their possible efficiency (…) establish an organisation as
appropriate, rational and modern” and “their use displays
responsibility and avoids claims of negligence” (Meyer
and Rowan, 1991, p. 53). These arguments were used in
this paper to explain why Marconi and its parent company
have substituted their previously MAS with an ABC
model. Within the reorganisation of the Portuguese
telecommunications sector these companies were
expected to ‘modernise’ themselves in order to
successfully face the challenges of liberalisation in both
the Portuguese and European telecommunications
markets. Such pressures of ‘modernisation’ came from
several
of
their
constituencies,
such
as
telecommunications competitors, capital market and the
Portuguese telecommunications regulator. In particular
the pressure posed by the regulator was determinant in
the change of Marconi and Portugal Telecom’s MAS. The
change imposed by the regulator was in consonance with
the change expected by other constituencies, which have
contributed to a faster replacement of Marconi and
Portugal Telecom’s ‘old’ MAS for a more ‘ up dated’
system.
Finally, the researcher suggests that as result of the
regulator’s coercive pressure, isomorphic MA practices
might have spread among European telecommunications
operators, especially those with ‘significant market power’
in which the determination of pricing interconnection was
an important issue. Calls are also made for a further
investigation
into
whether
the
European
telecommunications MA practices have became
isomorphic.
REFERENCES
Abrahamson (1991). “Managerial Fads and Fashions: The Diffusion and
Rejection of Innovations”, Acad. Manag. Rev. 16(3): 586-612;
Abrahmson (1996). “Management Fashion”, Acad. Manag. Rev. 21(1):
254-285;
Anderson SW (1995). “A Framework for Assessing Cost Management
System Changes: The Case of Activity Based Costing
Implementation at General Motors, 1986-1993”, Journal of
Management Accounting Research, Vol. 7, Fall, pp. 1-51;
Armstrong P (2002). The costs of activity-based management,
Accounting, Organizations and Society, Vol. 27: 99-120;
Baird KM, Harrison GL, Reeve, RC (2004). Adoption of activity
management practices: A note on the extent of adoption and the
influence of organizational and cultural factors, Management
Accounting Research, Vol. 15: 383-399;
Baxter J, Chua WF (2003). Alternative management accounting
research – ‘whence and whither’, Accounting, Organizations and
Society, Vol. 28(2/3): pp. 97-126;
Berry AJ, Otley DT (2004). Case-based research in accounting,
Humphrey, C. and Lee, B. (Eds) The Real Life Guide to Accounting
Research, Oxford: Elsevier, pp. 231-255;
Bhimani A, Pigott D (1992). “Implementing ABC: A Case Study of
Organizational and Behavioural Consequences”, Management
Accounting Research, 3: 119-132;
Bromwich M, Hong C (2000). “Costs and Regulation in the UK
Telecommunications Industry”, Management Accounting Research,
Volume 11(1): 137-165;
Burns J, Scapens RW (2000). “Conceptualizing Management
Accounting Change: An Institutional Framework”, Management
Accounting Research, Vol. 11: 3-25;
Carruthers BG (1995). “Accounting, Ambiguity, and the New
Institutionalism”, Accounting, Organizations and Society, 20(4): 313328;
Cooper R (1988a). “The Rise of Activity-Based Costing – Part One:
What is an Activity-Based Cost System?”, Journal of Cost
Management for the Manufacturing Industry, Summer, pp. 45-54;
Cooper R (1988b). “The Rise of Activity-Based Costing – Part Two:
When do I need an Activity-Based Cost System?”, Journal of Cost
Management for the Manufacturing Industry, Fall, pp. 41-48;
Cooper R (1989a). “The Rise of Activity-Based Costing – Part Tree:
How many cost drivers do you need, and how do you select them?”,
Journal of Cost Management for the Manufacturing Industry, Winter,
pp. 34-36;
Cooper R (1989b). “The Rise of Activity-Based Costing – Part Four:
What do Activity-Based Cost System do like?”, J. Cost Manag. for the
Manufacturing Industry, Spring, pp. 38-49;
Cooper R (1990). “Cost Classification in Unit-Based and Activity-Based
Manufacturing Cost Systems”, J. Cost Manag. 4(3): 4-14;
Cooper R, Kaplan RS, Maisel LS, Morrissey E, Oehm RM (1992).
Implementing Activity-Based Cost Management: Moving From
Analysis to Action, Institute of Management Accountants, Montvale,
NJ;
Dacin MT, Dacin PA (2008). Traditions as institutionalized practice:
implications for deinstitutionalization, Greenwood, R., Oliver, C.,
Suddaby, R. and Sahlin, K. (Eds) The Sage Handbook of
58 sur 59
Major 125
Organizational Institutionalism, Sage Publications, Thousand Oaks,
CA, pp. 327-351;
Datar S, Gupta M (1994). “Aggregation, Specification and Measurement
Errors in Product Costing”, The Accounting Review, 69(4): 567-591;
Davis GF, Anderson PJJ (2008). Social movements and failed
institutionalization: corporate (non) response to the AIDS epidemic,
Greenwood, R., Oliver C, Suddaby R, Sahlin K (Eds) (Provide other
year) The Sage Handbook of Organizational Institutionalism, Sage
Publications, Thousand Oaks, CA, pp. 371-388;
Dillard JF, Rigsby JT, Goodman C (2004). The making and remaking of
organization context – duality and the institutionalization process,
Accounting, Auditing and Accountability Journal, 17(4): 506-542;
DiMaggio PJ, Powell WW (1991a). “Introduction”, Powell, W. W. and
DiMaggio, P. J. (Eds) The New Institutionalism in Organizational
Analysis, The University of Chicago Press, Chicago, pp. 1-38;
DiMaggio PJ, Powell WW (1991b). “The Iron Cage Revisited:
Institutional Isomorphism and Collective Rationality in Organizational
Fields”, Powell, W. W. and DiMaggio, P. J. (Eds) The New
Institutionalism in Organizational Analysis, The University of Chicago
Press, Chicago, pp. 63-82;
Englund H, Gerdin J (2008). Transferring knowledge across sub-genres
of the ABC implementation literature, Management Accounting
Research, 19: 149-162;
Fligstein N (1991). “The Structural Transformation of American Industry:
An Institutional Account of the Causes of Diversification in the
Largest Firms, 1919-1979”, Powell, W. W. and DiMaggio, P. J. (Eds)
The New Institutionalism in Organizational Analysis, The University of
Chicago Press, Chicago, pp. 311-336;
Friedman AL, Lyne SR (1995). Activity Based Techniques: The Real
Life Consequences, CIMA, London;
Friedman AL, Lyne SR (1999). Success and Failure of Activity-Based
Techniques: A Long Term Perspective, CIMA, London;
Galaskiewicz J (1991). “Making Corporate Actors Accountable:
Institution-Building in Minneapolis-St. Paul”, Powell, W. W. and
DiMaggio, P. J. (Eds) The New Institutionalism in Organizational
Analysis, The University of Chicago Press, Chicago, pp. 293-310;
Gosselin M (1997). “The effect of Strategy and Organisational Structure
on the Adoption and Implementation of Activity-Based Costing”,
Accounting, Organisations and Society, 22(2): 105-122;
Granlund M, Lukka K (1998). “It’s a Small World of Management
Accounting Practices”, J. Manag. Account. Res. 10: 153-179;
Greenwood R, Oliver C, Sahlin K, Suddaby R (2008). Introduction,
Greenwood, R., Oliver, C., Sahlin, K. and Suddaby, R. (Eds) The
Sage Handbook of Organizational Institutionalism, Sage Publication,
Thousand Oaks, CA, pp. 1-46;
Hopper T (1994). “Activity Based Costing: A Critical Commentary”,
Fukuoka University Review of Commercial Sciences, 39(1-2): 135136, 479-511;
Hopper T, Major M (2007). Extending institutional analysis through
theoretical triangulation: regulation and activity-based costing in
Portuguese telecommunications. European Accounting Review,
16(1): 59-97;
Innes J, Mitchell F, Sinclair D (2000). “Activity-Based Costing in the
UK’s Largest Companies: A Comparison of 1994 and 1999 Survey
Results”, Management Accounting Research, Vol. 11: 349-362;
Johnson HT, Kaplan RS (1991). Relevance Lost: The Rise and Fall of
Management Accounting, 2nd ed., Harvard Business School Press,
Boston;
Jones TC, Dugdale D (2002). The ABC bandwagon and the juggernaut
of modernity, Accounting, Organizations and Society, 27: 121-163.
Lukka, L. and Granlund, M. (2002) The fragmented communication
structure within the accounting academia: the case of activity-based
costing research genres, Accounting, Organizations and Society,
27(1/2): 165-190;
Major M, Hopper T (2005). Managers divided: Implementing ABC in a
Portuguese telecommunications company, Management Accounting
Research, 16: 205-229;
Malmi T (1997). “Towards Explaining Activity-Based Costing Failure:
Accounting and Control in a Decentralized Organisation”, Manag.
Account. Res. Vol. 8, pp. 459-480;
Meyer JW, Rowan B (1991). “Institutionalised Organisations: Formal
Structures as Myth and Ceremony”, Powell, W. W. and DiMaggio, P.
J. (Eds) The New Institutionalism in Organizational Analysis, The
University of Chicago Press, Chicago, pp. 41-62;
Miller JG, Vollmann TE (1985). “The Hidden Factory”, Harvard Business
Review, September-October, pp. 142-150;
Miller P (1994). “Accounting as Social and Institutional Practice: an
Introduction”, Hopwood, A. G. and Miller, P. (Eds) Accounting as
Social and Institutional Practice, Cambridge University Press;
Moll J, Burns J, Major M (2006). Institutional Theory, Hoque, Z. (Ed.)
Methodological Issues in Accounting Research: Theories and
Methods, Spiramus, London, pp. 183-205;
Noreen E (1991). “Conditions Under Which Activity-Based Cost
Systems Provide Relevant Costs”, J. Manag. Account. Res. Volume
Three, Fall, pp. 159-168;
Roberts J, Scapens R (1985) “Accounting Systems and Systems of
Accountability – Understanding Accounting Practices in their
Organisational Contexts”, Accounting, Organisations and Society,
10(4): 443-456;
Ryan B, Scapens RW, Theobald M (2002) Research Method and
Methodology in Finance and Accounting, Thomson, London;
Scapens RW (1994) “Never Mind the Gap: Towards an Institutional
Perspective on Management Accounting Practice”, Management
Accounting Research, Vol. 5, pp. 301-321;
Scott WR (1991). “Unpacking Institutional Arguments”, Powell, W. W.
and DiMaggio, P. J. (Eds) The New Institutionalism in Organizational
Analysis, The University of Chicago Press, Chicago, pp. 164-182;
Scott WR (2008). Institutions and Organizations. 3rd Edition, Sage
Publications, Thousand Oaks, CA.
Scott WR, Meyer JW (1991). “The Organization of Societal Sectors:
Propositions and Early Evidence”, Powell, W. W. and DiMaggio, P. J.
(Eds) The New Institutionalism in Organizational Analysis, The
University of Chicago Press, Chicago, pp. 108-140;
Shields MD (1995). “An Empirical Analysis of Firms’ Implementation
Experiences with Activity-Based Costing”, Journal of Management
Accounting Research, Fall, pp. 148-165;
Shields MD, Young SM (1989). “A Behavioral Model for Implementing
Cost Management Systems”, J. Cost Manag. Winter, pp. 17-27;
Soin K, Seal W, Cullen J (2002). ABC and organizational change: an
institutional perspective, Management Accounting Research,
Vol.13(2), pp. 249-271;
Staubus G (1971). Activity Costing and Input-Output Accounting,
Richard D. Irwin Inc.;
Wickramasinghe D, Alawattage C (2007). Management Accounting
Change: Approaches and Perspectives, Routledge, Oxon;
Yin RK (2009). Case Study Research: Design and Methods, 4th edition,
Sage Publications, Thousand Oaks, CA;
59 sur 59