By 1925, almost all management accounting practices used today had been developed.
Distorted product costs, delayed and overly aggregated process control information, and short-term performance measures as observed today, should have imposed new demands on the organization's management accounting systems. When cost systems became automated beginning in the 1960's, system designers basically automated the existing manual systems found in the factory. .
Left unquestioned was whether these systems were still sensible given the great expansion in information technology and migration to highly technical operations. "As product life cycles shortened, and as more cost must be incurred before production begins [e.g., R&D], . traditional financial measures such as periodic earnings and accounting ROI become less useful measures of corporate performance.".
Optimal cost management systems should: allocate costs for periodic financial statements; facilitate process control; compute product costs; and support special studies (e.g., discount cash flow evaluations for new asset acquisitions). "That many of the most significant product costs are called fixed or sunk signifies the poverty of current cost accounting thinking. The goal of a good product cost system should be to make more obvious, more transparent, how costs currently considered to be fixed or sunk actually do vary with decisions made about product output, product mix, and product diversity." Such systems are supportive of JIT/TQM and CIM environments, which minimize inventory and WIP costs, and hence, overall product costs. "The accounting system is most valuable to management not when it answers questions, but when it raises them." Failure to recognize these problems and make required modifications will inhibit the ability of firms to be effective and efficient global competitors.
Key issues and approaches in historical methodology.
Management accounting emerged as a product of the Industrial Revolution.
