Advanced Management Accounting Report: Article Analysis & Evaluation

This report analyzes Shillinglaw's article, "Managerial cost accounting: Present and Future," which examines the evolution of managerial cost accounting and identifies perceived defects in product costing, ex-post product costing, and cost control. The study focuses on key factors such as causality, low traceability of costs, overhead apportionment rates, and activity-based costing, and the criticisms associated with these factors. The report highlights the importance of causality in product costing, the challenges of cost traceability in modern manufacturing, and the benefits of activity-based costing. Additionally, it discusses ex-post product costing and cost control reporting, including the downgrading of variances, the shift from cost control to cost reduction, and the estimation of non-value-added costs. The report concludes by emphasizing the need for continued research and the importance of managerial accountability through accurate reporting and cost reduction strategies, and the use of activity-based costing. The report also offers a critical review of the article's limitations and suggests areas for further research in the context of changing business environments.

Running head: ADVANCED MANAGEMENT ACCOUNTING
Advanced Management Accounting
University Name
Student Name
Authors’ Note

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Introduction
The selected article for the study is “Managerial cost accounting: Present and Future.
Journal Accounting Research penned by Shillinglaw, Gordon attempts to recognize diverse
transforming ways to make managerial cost accounting a significant part of the management
process. The current study presents perceived defects of product costing, ex post product
costing, cost control performance reporting and required research. The study at hand
presents the criticisms directed at the systems of costing incorporated in the management
accounting and makes effort to recognize the vital actions that need to be undertaken for
making it a crucial part of management process. Critical analysis of the current section on
perceived defects hereby helps in understanding limitations of methods, identification of the
defects that leads to modifications and subsequently transformations

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This section elucidates in detail the key factors that the chosen article raises:
Key factors Identified in the selected article
Identification of perceived defects of product costing based on review of the article
Shillinglaw in this article presents the view that the issues of costing mechanisms designed
during 1960s utilized in management accounting and fixes to the same mechanisms that
were utilized during the period of late 1980s. The author also intends to recognize different
ways to craft managerial cost accounting an obligatory part of management procedure in the
upcoming period.
The author expounds the perception regarding issues of methods of costing that is
essentially indicated as perceived defects of costing. As per the author, for product costing
to be consistent it ought to replicate few important principles namely causality, costs
traceability as well as activity based costing.
The application of causality is important as short term causality indicates towards usage of
capacity. Long-term causality necessarily compliments this specific dimension with
specifically costs of delivering capacity. In case if this principle is not enumerated
appropriately, then product costing can prove to be erroneous and any managerial use might
possibly become skewed. In case if this specific principle of causality is not enumerated and
applied appropriately, then the scheme of product costing shall become inappropriate. Also,
traceability of costs also became quite difficult during the period 1980s with the enhanced
ability of diverse manufacturers to switch different products seamlessly. Use of different
drivers as bases of allocation can enhance overall level of accuracy of pronouncements of
reporting costs of product. As discussed in the article, the use of drivers of cost can permit a
firm to have different rates of apportionment at diverse stages of production. Ex-post product
costing can help in updating database with requisite information particular to the product.

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Causality
The article under deliberation raises the point that the subsisting systems, existing body of
academic literature essentially fails to carry out the causality principle appropriately.
Analysis of the given article reveals that causality is the core notion in particularly product
costing. Essentially, causality is often overlooked and this both short as well as long term
insinuations (Chenhall & Moers, 2015). Short term causality indicates towards the impact of
the usage of capacity on particularly cost. On the other hand long term causality takes in this
and complements this aspect and is also applicable to costs of carious providing capacity. In
case if this specific is not enumerated appropriately, then product costing will become
incorrect (Mersereau, 2006). Therefore, managerial use of this system will also become
skewed. In essence, it is believed that textbooks as well as systems during the period 1980s
also did not properly implement this principle of causality appropriately.
Low traceability of costs
Another major aspect identified in this article is the low traceability of incurred costs. As
suggested in the given article, nowadays in different production operations carried out in
both manufacturing as well as service sectors, the overall percentage of different material
along with labour costs has drastically declined. In this case, it can be observed that sizes of
batches have in itself been reduced in specifically job order production. In addition to this,
long production runs of various identical units of product are being substituted in repetitive
manufacturing by mainly flexible systems. For this, changeovers from one product to another
are attained in minutes or else in seconds. As a consequence, diverse direct materials arrive
at the production floor in comparatively smaller quantities and labour is employed to
particular products in short term (Shillinglaw, 1989). As such, costs of tracking the costs to
different individual set of products would necessarily become prohibitive. Consequently,
these costs get apportioned to various products individually, decreasing overall accuracy of
information on product costs.

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Overhead apportionment rates
As mentioned in the given case study, criticisms attached to cost accounting can be
associated to accuracy of rates of apportionment (Institute of Management Accountants,
2008). In essence, there are criticisms of specific practice rather than of the theory of costing
(Shillinglaw, 1989). This further suggest about changes in the way cost centres are defined
in textbooks.
Activity Costing
As suggested by Garg et al., (2003), important benefits of activity costing by utilization of
cost centers is necessarily efficiency. In a bid to record costs in fields, a corporation can
observe where it might perhaps be able to lessen costs and enhance profits. In essence,
management does have feasible justification regarding why activity costing cannot be
advantageous. This can also interrupt existing schedules, add more to costs, augment
uncertainty, more pricey mechanisms with few rates, and augmented accuracy might
perhaps not deliver considerable advantage (Garg et al., 2003). Nonetheless, with greater
comprehension of activity costing and progresses in computer technology, administration will
start transferring rates of apportionment and concentrate on activity costing during the
period1990’s.
Discussion of other criticisms
The article also talks about three other criticisms of cost accounting that include disregard of
imbalances in resource utilization, insensitiveness to product to product variances in different
requirements for administrative assistance and inadequacy to the requirements of strategic
planning.
Ex post product costing and cost control dimensions
The article thereafter discusses about ex post costing and adds that this arrangement calls
for a different advance. The current article presents the view that the concentration in ex

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post product costing need to be on the primary physical inputs that can be traced to different
individual jobs or else products and not necessarily on the amount of cost absorbed.
However, this point is not always properly understood (Weygandt et al., 2015). Thereafter,
the study explains the cases where ex ante costing can be used as and when required. In
addition to this, the study also presents the controlling reporting side of management
accounting that sheds light on certain basic measurement notions. Here, the author
discusses about three different developments that changed the process of cost control
reporting. The first one is downgrading of variances of various departmental costs, shift from
cost control to reduction of costs and estimation of non-value added costs (Shillinglaw, 1989)
Needed Research
The research groups of particularly management accounting are necessarily the National
Association of Accountants, CAM-I as well as Financial Executives Research Foundation,
There is continued hard work to collect information for studies such as study on McNair-
Mosconi-Norris. This will keep on to breaking barriers to develop better system of
management reporting. Essentially, it is during this time this specific article was presented,
and two different barriers were identified. Again, the first factor can be associated to the fact
that corporations did not have the desire to present their stories completely. This can be to
some extent been reinstated by various "best practices" utilized in segments. In addition to
this, the second facet is the lack of acceptability of research to various editors of educational
journals and by the ones who present decisions regarding tenure.
Authors’ Views with conclusive statements
First of all, Shillinglaw presents the views on relegation of departmental cost variances. In
case if management is troubled about department production, then it could be regarding
production inventory that will not sell. Therefore, management would have the need to
examine variance between the ex ante reporting, that can reflect expected outcomes for
particularly inventory, expend/payout, as well as revenue. As per the viewpoint of the author,

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there is also a need to examine ex post reporting, which can reflect actual outcomes for
particularly inventory, expends, as well as revenue. It is only then management can become
more accountable by not wasting resources on capacity implying lessening wastages of
resources on building ability of a business or resources enumerated in both quality as well
as quantity. According to the author, there is an alteration from cost control to reduction of
costs. In the transforming business environment true accomplishment can only be achieved
by continuous improvement (Institute of Management Accountants, 2008). The concentration
needs to be on reduction of costs by adoption of costing mechanisms that can reduce
wastage of time, money as well as effort. The focus can be on activity costs. Another need is
to approximate various non value added costs namely inspection time, waiting time as well
as set up time.
In conclusion, the given article is restricted to discussions on limitations associated to
problem of research under investigation. This study at hand explicates in detail about the
constraints and suggests areas of further research. In addition to this, analytical review of
the study helps in recognizing evolution involved in the managerial cost accounting as an
important part of management process. This article at hand aptly expounds that the
research group that need to put in continued efforts to acquire information in studies.
Administration of firms can examine variance that exists between particularly ex
ante reporting system, that can reflect anticipated outcomes for inventory, firms’ expenditure,
as well as revenue. Again, ex post reporting system, can reflect actual results for particularly
inventory, firm’s expenditure, as well as revenue. In this case, Management can thus
become more responsible by reducing wastage of money on capacity. In today’s altering
business environment there is need for continuous improvement and concentration on cost
reduction can happen by adoption of methods of costing that reflect that there is both wasted
time and money otherwise effort. Again, focus on activity costs can also help in
improvement. Additionally, estimation of non- value added costs can enhance performance,
quality as well as function.

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References
Garg, A., Ghosh, D.,Hudick, J. &Nowacki, C. (2003). Roles and Practices in Management
Accounting Today. Strategic Finance,
July.http://sfmagazine.com/wp-content/uploads/sfarchive/2003/07/Roles-and-
Practices-in-Management-Accounting-Today.pdf
Institute of Management Accountants. (2008). Statement on Management accounting,
Definition of Management Accounting. Montvale, New Jersey.
Mersereau, A. (2006). Pushing the art of management accounting. CMA Management,
February.
Shillinglaw, G. (1989). Managerial cost accounting: present and future. Journal of
Management Accounting Research, 1(1), 33-46.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & managerial accounting.
John Wiley & Sons.