KaplanRobert S.. “Measuring, Manufacturing Performance: A New Challenng for Management Accounting Reearch Review,” The Accounting Review (October1983), pp. 686-705; Robert S. Kaplan, ''The Evolution of Management Accounting,” The Accounting Review (July l984), pp. 690-718; Robert S. Kaplain. “Yesterday's Accounting Undermines Production's Progres,” Harvard Business Review (July/August 1984), pp. 95-101.
2.
lnterestingly the fully loaded shop labor rate was approximately $50 per hour, well in excess of the $30 per hour figure, used to cost out engineering design time. It is a curious consequence of direct-labor burden cost systems to have an engineer's time priced below that of semi-skilled workers.
3.
In principle, one could compare the total costs of two orders for the same propulsion units performed before and after the reorganization of the factory. In practice, one would be unable to disentagle the experience curve effects during each order, different material price di counts, and changes in the price level for material and labor. Also, working with only a single estimate of unit costs (computed as total project costs divided by number of units produced) gives the analyst no degrees of freedom to compensate for random, noncontrollable influences on costs. Also, lacking data on monthly production, one cannot determine the division's success in reducing average inventory levels.
4.
Ridgway pointed out, three decades ago, the problems which arise from excessive focus on an inappropriate performance measure. RidgwayV. F.. “Dysfunctional Consequences of Performance Measurement, ” Administrative Science Quarterly (September1956), pp. 240-247.
5.
The incompatibility of cost accounting and management control systems of similar plants in the same division points out a hidden cost of growth through acquisition. As we understand better the rigidity of existing accounting systems, we can expect that growing by acquisition will likely lead to a division, or company, having multiple, noncomparable measurement systems in various plants. In contrast, internally generated growth gives companies the opportunity to install its preferred measurement system in newly established plants.
6.
See, for example, the innovative practice of shifting direct labor to an overhead cost category for a production process where direct labor is less than 5 percent of total manufacturing costs. HuntRickGarrettLindaMerzC. Mike. “Direct Labor Cost Not Always Relevant at H-P,” Management Accounting (February1985), pp. 58-62.
