PDF Ebook Productivity Measurement and Management Accounting
Productivity improvement has become a key objective for U.S. industry.' Productivity measurement, however, has gone largely unnoticed by accounting professionals, particularly those teaching and doing research in accounting departments and business schools. Accounting textbooks virtually ignore issues of productivity measurement, and accounting journals contain few articles on the subject. Most articles on productivity measurement are written by economists usually interested in productivity measurement at the national economy level—or by industrial engineers and production professionals.
The implicit, and occasionally explicit, rationalization for the accounting profession's lack of interest in productivity measurement apparently arises from the belief that variances computed by the firm's standard cost system, particularly usage variances, are sufficient to measure the efficiency of the enterprise. Presumably, a desire for increased productivity could be signaled by across-the-board tightening of standards by the desired percentage. If a firm were inefficient or failed to meet its productivity improvement target, then the accounting system would report many unfavorable usage variances.
We do not believe that even well-designed and well-operated standard cost systems provide adequate information for productivity measurement and improvement programs. Primarily this is an empirical statement. We observe numerous companies, with extensive standard cost accounting sys-tems, stablishing productivity measurement systems independent of the accounting system and even establishing separate departments to develop productivity statistics.^ These companies apparently find a need to develop productivity measures to supplement the information being reported by their intemal accounting systems.
The relationship between productivity measurements and the usage variances produced by standard cost systems has not been explored, nor is the relationship obvious. Further, because accounting researchers have not investigated productivity measurement in any depth, much of the considerable experience accounting scholars have gained during this century on the operation and analysis of standard cost systems has not been applied to productivity measurement techniques. In this paper, we attempt to meet both goals. We articulate a role for productivity measurement that is not easily met by a collection of usage variances. We illustrate the relationship between productivity measurement and the output from a standard cost system. And we identify some shortcomings of a widely quoted productivity measurement system. These shortcomings can be overcome by incorporating information from the standard cost system into the productivity measurement system. Thus, this paper will bridge the current gap between the usage variances produced by accountants and the productivity measures produced by economists, industrial engineers, and operations managers. In the process, we develop improved performance measures by synthesizing the best aspect from each school of thought.
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PDF Ebook Productivity Measurement and Management Accounting
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