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Toward a New Era in U.S. Manufacturing The Need for a National Vision (1986) / Chapter Skim
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Appendix B: Management Accounting in the Future Manufacturing Environment
Pages 126-130

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From page 126...
... Also, the data are aggregated, so monthly variances are difficult to trace to individual products or batches. The new manufacturing technology provides an opportunity to move from cost measurement on a delayed, aggregate basis to performance measurement on a continuous, hourly, or daily basis, by resource category, cost center, and product class.
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From page 127...
... The present monthly cost accounting reporting cycle, with its allocation of overhead based on direct labor content, exists mainly to distribute manufacturing costs between goods sold and inventory so that monthly profit and loss statements can be computed. This financial reporting objective has been the main driver for cost accounting systems.
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From page 128...
... At what rate are current and expected future sales generating cash to recover the cash invested in product and process development? At the end of the product's life, management will be able to know whether and by how much the product generated cash in excess of that invested in it, but to apportion this income or loss to arbitrarily short periods within this life cycle will not be an interesting or relevant exercise.
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From page 129...
... Percentage of delivery times met, whether product development milestones are being achieved, customer satisfaction measures, employee absenteeism, turnover, skill levels, and morale will be much more interesting short-term performance measures than a financial profit figure requiring arbitrary allocations of expenditures on past, current, and future product and process developments. Thus, the new manufacturing environment not only will require entirely new cost measurement and management systems, but also will cause managers to abandon attempts to measure profitability over periods as short as a month, quarter, or even a year.
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From page 130...
... ~ summary, the new manufacturing technology will require major modifications in the way Finns measure and manage costs, in their measures of performance both financial and nonfinancialduring short periods, and in the way they justify investments in new technology. Failure to make these modifications will inhibit the ability of firms to be effective and efficient global competitors in the manufacturing environment of the twenty-first century.
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Key Terms

  • cost accounting
  • manufacturing environment
  • manufacturing costs
  • short periods
  • cash flows

  • manufacturing technology
  • cost measurement
  • highly automated
  • net cash
  • labor savings

  • process development
  • variable costs
  • automated environments
  • arbitrary allocations
  • lead times

  • aggregate basis
  • cause managers
  • experience declining
  • product class
  • offers significant

  • accounting reporting
  • total manufacturing
  • traditional cost
  • abandon attempts
  • future product

  • period expenses
  • require entirely
  • technology provides
  • current procedures
  • income measurement


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