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It has become obvious in the last few years that traditional costing systems have failed to keep up with the increasing demands imposed on them by the ever-changing manufacturing environment. Much research conducted in the last few years has reported that both preparers and users of cost accounting information are dissatisfied with their product costing systems and that the method of charging overhead to products was identified as the major area of concern.
In the light of these results, approaches like activity-based costing (ABC) have been warmly welcomed by both academics and practising management accountants. As ABC is said to be easy to implement and to produce highly significant results and improvements, it is understandable that the theory is discussed in all leading accounting magazines of the English-speaking world (USA, Canada, Great Britain) as well as in many general management publications like the Harvard Business Review.
Despite this response it is still surprising to us to see that, despite the 'revolutionary' character of ABC, Cooper and Kaplan's theories meet with nearly unanimous approval in the English-speaking world. Only a very few authors, it would seem, give a critical opinion on the subject.
A review of German and Swiss publications in the last five years gives quite another picture. While some authors support the ideas of Cooper and Kaplan, still other German-speaking managers and academics criticise different aspects of ABC or even reject the method in its entirety.
Among the most critical arguments are the following:
1 Cooper and Kaplan claim to have 'invented' the concept of cost drivers. Years ago, academics like Wolfgang Kilger had already proposed overhead allocation bases for the support departments which were nearly identical with today's cost drivers. Further, they had integrated them into their direct costing concepts.
In the same way, the distinction between volume-related and nonvolume-related cost drivers (e.g. related to the number of set-ups or material requirement orders) due to batch or product complexity is also mentioned in the work of Kilger and other German authors.
2 Nearly all the German authors criticise the fact that Cooper and Kaplan's activity-based costing system is compared to so-called 'traditional' costing systems which use direct labour or machine hours as single plantwide allocation bases for overhead. But many German companies, and...