This paper represents a key contribution from the perspective of activity based cost concepts because it introduced, or perhaps reintroduced, the "cost of transactions philosophy". Miller and Vollman point out that the drivers of support costs were hidden in traditional accounting systems. Support costs are not driven by production volume, but by four types of transactions as follows:

   1. Logistical transactions - e.g., ordering, executing, receiving, expediting,
                                                shipping.

   2. Balancing transactions - e.g., matching the supply of materials, labor and
                                                capacity with demand.

   3. Quality transactions - e.g., inspection, rework, training, engineering, field
                                            support.

   4. Change transactions - e.g., changes in engineering designs, schedules,
                                            standards, routings.

The authors advocate a variety of ways to eliminate transactions such as implementing just in time systems and related concepts.

Note: The term transactions costing was used when academics and practitioners discussed ABC concepts in the mid 1980s. Another related term was attributable costing. I think the term attributable came from Gordon Shillinglaw. Later, the term transactions was replaced by activities. The term activity accounting appears in the CAM-I conceptual design document (Berliner and Brimson, 1988). The term activity based costing is from John Deere Company and appeared in a Harvard Business School Case (187-107) published in 1987. Robin Cooper and Robert Kaplan adopted the ABC terminology and the rest of the world followed their lead.  Although the terminology is relatively new, the ideas can be traced back to around 1910 in articles written by Alexander Hamilton Church. See Johnson and Kaplan (1987, Chapter 3) for a discussion of Church's ideas and references.

The ideas in this paper are discussed by various authors. For example, see Johnson and Kaplan (1987, 237-238).

REFERENCES

Berliner, C., and J. A. Brimson, eds. 1988. Cost Management for Today's Advanced Manufacturing: The CAM-I Conceptual Design. Boston: Harvard Business School Press. (Short Summary or Concepts.) (Longer Summary.)

Johnson, H. T. and R. S. Kaplan. 1987. Relevance Lost: The Rise and Fall of Management Accounting. Boston: Harvard Business School Press. (Summary).

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