Colin Drury’s research while affiliated with University of Huddersfield and other places

Kaplan has argued that a single accounting system should not be used to calculate product costs for use in decision making because it is not possible for a single system to satisfy the three different purposes of costs systems. Instead, he has suggested that operating units should use three separate systems to satisfy each of the three purposes or a database system from which information can be extracted to satisfy each purpose. This paper uses the results of 259 useable questionnaire responses and 55 interviews with British management accountants to examine which types of cost system are used to obtain product costs in British manufacturing industry and why these cost systems are used. The results reveal that single, separate and database systems are used to obtain product costs, with single systems being the most popular. Single systems are used for historical reasons and appear heavily institutionalised in British manufacturing industry. Although separate and database system are used they are not significantly different from single systems. The implication of this is that costs calculated using these two types of system might not satisfy the three different purposes of cost systems.

This paper reports the results of interviews with 51 qualified management accountants. Grounded theory techniques are used to seek to explain why operating units in manufacturing industry do or do not undertake investigations into the appropriateness of activity-based costing (ABC) and, for those that investigate ABC, how they carry out these investigations. The interviews revealed that operating units investigated ABC for a variety of reasons with the most popular being to calculate more accurate product costs and because ABC was a new fashionable technique. Similarly, interviewees offered a variety of reasons for having never considered ABC. The interviewees used a variety of methods to investigate the appropriateness of using ABC, but these did not tend to be very compliated.

This paper reports on the findings of a postal questionnaire that examines the extent to which potential contextual factors influence the characteristics of product costing systems. Prior research has mostly used the adoption or non-adoption of ABC systems to capture the characteristics of product costing systems. This research has generally been inconclusive and has been unable to establish strong links between ABC adoption and those contextual factors that have been identified in the literature that are conducive to the adoption of ABC systems. Instead of using only the adoption or non-adoption of ABC systems as a measure of product cost system design this research uses four different proxy measures of cost system sophistication to capture the characteristics of the product costing systems. This allows for a more robust test of the relations among the predictor variables and cost system sophistication. Results indicate that higher levels of cost system sophistication are positively associated with the importance of cost information, extent of use of other innovative management accounting techniques, intensity of the competitive environment, size, extent of the use of JIT/lean production techniques and the type of business sector. No association was found between the level of cost system sophistication and cost structure, product diversity and quality of information technology.

Recent research into management accounting practices suggests that companies are now placing considerable emphasis on profitability analysis and consider it to be one of the most important management accounting practices. There is however little recent empirical research relating to the content and role of profitability analysis in companies. This paper will address this omission and report the findings derived from a survey of UK companies relating to information that is contained in profitability reporting, generated for managing the existing mix of a firm's activities. In particular, it focuses on the nature, content and role of profitability analysis carrying out some exploratory analysis and testing various propositions to explain the divergence in observed practices.A distinctive feature of the research is that, unlike some previous research, rather than focusing on the information that is accumulated within the costing system it focuses primarily on the information that is extracted from it for different purposes. Not surprisingly we find that different information is extracted for profitability analysis than for pricing purposes. The research findings also indicate that firms use a hierarchy of profit measures within the periodic profitability analysis statements and that profitability analysis is used mainly for attention-directing purposes for signalling the need for more detailed studies. For profitability analysis, the findings suggest that, in terms of what is considered the most important attention-directing measure, the use of some form of full costs based on arbitrary allocations is not as widespread as that suggested by previous studies. Evidence is also presented to suggest that the level of cost system complexity influences the observed practices.

Research into product costing practice has not studied whether there are differences in product costing practice between different types of manufacturing. This paper compares the product costing practices of operating units in discrete-part and assembly manufacturing, and continuous production process manufacturing. The results show that there are few differences in product costing practices between these two manufacturing methods. Similar proportions of operating units in these two manufacturing environments use similar methods to treat overheads and have similar experiences of activity-based costing. The only area of difference is in the use of overhead rates where significantly more units in discrete-part and assembly manufacturing use a direct labour hour rate and significantly more units in continuous production process manufacturing use units produced and production time-based rates.