Management And Accounting Web

Anderson, S. W., J. W. Hesford and S. M. Young. 2002. Factors influencing the performance of activity based costing teams: A field study of ABC model development time in the automobile industry. Accounting, Organizations and Society 27(3): 195-211.

Summary by Rosalyn Mansour
Ph.D. Program in Accounting
University of South Florida, Spring 2004

ABC Main Page | Teams and Teamwork Main Page

This article explores how competition in the external environment, team inputs, and team dynamics affect team outcomes. This is important because cross-function teams with diverse perspectives often develop ABC models. This study helps explain why ABC implementation teams may sometimes fail as well as how to make the ABC modeling process more efficient.

The authors identified two major U.S. automobile manufacturers that allowed them access to 9 plants each. The two companies and the individual plants were chosen by the authors according to criteria developed by prior research. The authors wanted plants who had developed ABC systems as part of a corporate directive. Onsite, the authors interviewed key plant personnel and conducted surveys where they collected information about the plant characteristics and complexity of the plants’ products and processes. To test their hypothesized model, the authors used path analysis on the interview and survey data collected.

There are a total of 10 variables in the hypothesized model. The following describes the variables modeled. Remember that these variables are defined from the perspective of an automobile manufacturer. The model and hypotheses are also shown below.

Competition – is an external environment attributed. Competition is operationalized according to whether the plant is a core or non-core plant. A core plant is considered to have little competition because much capital investment by the corporation has been made and it sells most of what it produces (for example, it manufactures the engines). A non-core plant might make items incidental to manufacturing the automobile such as components; therefore, competition is high and price-based (often outsourced).

ABC Training – is part of the team inputs. Training in ABC is thought to increase the level of significance people put on the ABC modeling task.Training is operationalized as the number of hours company training was provided.

Team Size – is considered a team input and is based on the number of plant employees assigned to the ABC project.

Team Heterogeneity – is a team input and measures the degree of functional diversity in the ABC team members.

Consultant – is a team input since all of the plants for one of the two companies studied used a consultant to help with the ABC implementation.

Task Significance, Conflict Resolution, and Team Cohesion - are all components of team dynamics. Data was captured via scale asking for respondent’s attitudes about ABC and the ABC team.

Model Complexity – is a measure of the team’s outcome.To determine model complexity, the authors used number of activity centers, number of first stage cost drivers, and number of second stage cost drivers. The quantity of each was standardized and then summed to get a measure of overall model complexity.

Development Time – is also a measure of the team’s outcome and was measured from the time the team began training until the first product costs were generated by the ABC model.

Factors Related to an Activity-Based Costing Model

H1a: As team size increases, the team's ability to resolve conflicts decreases (p. 198). REJECTED

H1b: As team heterogeneity increases, the team's ability to resolve conflicts decreases (p. 198).REJECTED

H1c: The presence of an external consultant increases the team's ability to resolve conflicts (p 198). REJECTED

H2a: ABC teams that face a high level of competition will have a greater level of ABC training than those that face low level of competition (pg. 198). REJECTED

H2b: ABC teams that face a high level of competition will have larger team sizes than those that face a low level of competition (pg. 198). REJECTED

H3a: As the level of ABC training increases, the perceived level of task significance increases (p. 199). SUPPORED

H3b: ABC teams that face a high level of competition will experience a higher-level of task significance than those that face a low level of competition (p. 199). SUPPORTED

H4a: As the level of task significance increases, the level of ABC team cohesion increases (p. 199). SUPPORTED

H4b: As the team's ability to resolve conflicts increases, so does the level of ABC team cohesion (pg. 199). SUPPORTED

H5a: As the team's ability to resolve conflicts increases, ABC model complexity decreases (p. 200). SUPPORTED

H5b: As the perceived level of external competition increases, ABC model complexity increases (p. 200). SUPPORTED

H5c: The presence of a consultant increase ABC complexity (p. 200). SUPPORTED

H6a: As the level of team cohesion increases, the time it takes to develop the ABC model decreases (p. 201). SUPPORTED

H6b: As ABC model complexity increases, the time to develop the ABC model increases (p. 201). REJECTED


Related summaries:

Ali, H. F. 1994. A multicontribution activity-based income statement. Journal of Cost Management (Fall): 45-54. (Summary).

Argyris, C. and R. S. Kaplan. 1994. Implementing new knowledge: The case of activity-based costing. Accounting Horizons (September): 83-105. (Summary).

Atkinson, A. A. and W. Shaffir. 1998. Standards for field research in management accounting. Journal of Management Accounting Research (10): 41-68. (Summary).

Baxendale, S. J. and P. S. Raju. 2004. Using ABC to enhance throughput accounting: A strategic perspective. Cost Management (January/February): 31-38. (Summary).

Carter, T. L., A. M. Sedaghat and T. D. Williams. 1998. How ABC changed the post office. Management Accounting (February): 28-32, 35-36. (Summary).

Cokins, G. 1999. Using ABC to become ABM. Journal of Cost Management (January/February): 29-35. (Summary).

Cokins, G. 2002. Integrating target costing and ABC. Journal of Cost Management (July/August): 13-22. (Summary).

Cooper, R. 1990. Implementing an activity-based cost system. Journal of Cost Management (Spring): 33-42. (Summary).

Cooper, R. 1996. Activity-based management and the lean enterprise. Journal of Cost Management (Winter): 6-14. (Summary).

Cooper, R. and R. S. Kaplan. 1992. Activity-based systems: Measuring the costs of resource usage. Accounting Horizons (September): 1-13. (Summary).

Cooper, R., and R. S. Kaplan. 1998. The promise - and peril - of integrated cost systems. Harvard Business Review (July-August): 109-119. (Summary 1, Summary 2).

Corbett, T. 2000. Throughput accounting and activity-based costing: The driving factors behind each methodology. Journal of Cost Management (January/February): 37-45. (Summary).

Gosselin, M. 1997. The effect of strategy and organizational structure on the adoption and implementation of activity-based costing. Accounting, Organizations and Society 22(2): 105-122. (Summary).

Hughes, S. B. and K. A. Paulson Gjerde. 2003. Do different cost systems make a difference? Management Accounting Quarterly (Fall): 22-30. (Summary).

Ittner, C. D., D. F. Larcker and T. Randall. 1997. The activity-based cost hierarchy, production policies and firm profitability. Journal of Management Accounting Research (9): 143-162. (Summary).

Jones, T. C. and D. Dugdale. 2002. The ABC bandwagon and the juggernaut of modernity. Accounting, Organizations and Society 27(1-2): 121-163. (Summary).

Kaplan, R. S. 1990. The four stage model of cost systems design. Management Accounting (February): 22-26. (Summary).

Kaplan, R. S. 1998. Innovation action research: Creating new management theory and practice. Journal of Management Accounting Research (10): 89-118. (Summary).

Kaplan, R. S. and M. E. Porter. 2011. How to solve the cost crisis in health care: The biggest problem with health care isn't with insurance or politics. It's that we're measuring the wrong things the wrong way. Harvard Business Review (September): 46-64. (Time-driven ABC applied to health care). (Summary).

Kaplan, R. S. and S. R. Anderson. 2004. Time-driven activity-based costing. Harvard Business Review (November): 131-138. (Summary).

Kaplan, R. S. and S. R. Anderson. 2007. The innovation of time-driven activity-based costing. Cost Management (March/April): 5-15. (Summary).

Kaplan, R. S., M. E. Porter and M. L. Frigo. 2017. Managing healthcare costs and value. Strategic Finance (January): 24-33. (Summary).

Kaplan, S. E. and J. T. Mackey. 1992. An examination of the association between organizational design factors and the use of accounting information for managerial performance evaluation. Journal of Management Accounting Research (4): 116-130. (Summary).

Kee, R. C. 2001. Implementing cost-volume-profit analysis using an activity-based costing system. Advances in Management Accounting (10): 77-94. (Summary).

Keys, D. E. 1994. Tracing costs in the three stages of activity-based management. Journal of Cost Management (Winter): 30-37. (Summary).

Keys, D. E. and R. J. Lefevre. 1995. Departmental activity-based management. Management Accounting (January): 27-30. (Summary).

Krumwiede, K. R. 1998. ABC: Why it's tried and how it succeeds. Management Accounting (April): 32-34, 36, 38. (Summary).

Landry, S. P., L. M. Wood and T. M. Lindquist. 1997. Can ABC bring mixed results? Management Accounting (March): 28-30, 32-33. (Summary).

Mangan, T. N. 1995. Integrating an activity-based cost system. Journal of Cost Management (Winter): 5-13. (Summary).

Martin, J. R. Not dated. Chapter 7: Activity Based Product Costing. Management Accounting: Concepts, Techniques & Controversial Issues. Management And Accounting Web.

Mecimore, C. D. and A. T. Bell. 1995. Are we ready for fourth-generation ABC? Management Accounting (January): 22-26. (Summary).

Palmer, R. J. and M. Vied. 1998. Could ABC threaten the survival of your company? Management Accounting (November): 33-36. (Summary).

Porter, M. E. and T. H. Lee. 2013. The strategy that will fix health care: Providers must lead the way in making value the overarching goal. Harvard Business Review (October): 50-67. (This article shows how the time-driven ABC approach fits into the strategic value agenda for a high-value health care delivery system). (Summary).

Ruhl, J. M. and B. P. Hartman. 1998. Activity-Based Costing in the Service Sector. Advances in Management Accounting (6): 147-161. (Summary).

Sandison, D., S. C. Hansen and R. G. Torok. 2003. Activity-based planning and budgeting: A new approach. Journal of Cost Management (March/April): 16-22. (Summary).

Troxel, R. and M. Weber. 1990. The evolution of activity-based costing. Journal of Cost Management (Spring):14-22. (Summary).

Turney, P. B. B. 1990. Ten myths about implementing an activity-based costing system. Journal of Cost Management (Spring): 24-32. (Summary).

West, T. D. and D. A. West. 1997. Applying ABC to healthcare. Management Accounting (February): 22, 24-26, 28-30, 32-33. (Summary).

Zeller, T. L. 2000. Measuring and managing e-retailing with activity-based costing. Journal of Cost Management (January/February): 17-30. (Summary).