It has been said that modern developments such as ABC are sometimes Essay - 1

It has been said that modern developments such as ABC are sometimes implemented because they are fashionable and not because they provide extra information to management. (Discuss the above statement) - Essay Example Job costing is another modern development, where the management gets information concerning the costs for each job order, their specifications and scope. Contract costing is yet another development that provides the management with information concerning heavy expenditure which takes a long period of time (Brimson, J. A. 1991). Historically, most of the companies placed their focus on the creation of value rather than investing in assets and organization. The dramatic development of companies led to the realization of the need to have practical accounting systems. The development of the ABC system has led to a positive change in productivity by espousing the identification of inefficient products, the allocation of more profits on resources, and cost reduction (Gosselin, M. 2005). However, most firms are experiencing problems ascribed to the implementation of ABC and in extreme cases; the implementation of the system fails to work out. For instance, in highly developed countries, some of the companies fail to grow and became stagnant owing to the use of ABC. Most companies that carry out a cost-benefit analysis on the use of ABC discontinue the implementation of the system since it is costly. The management should get constant updates on a company’s cost performance (Grieco, P. L., & Pilachowski, M. 1995). In using ABC system, some of the overhead costs are difficult to separate and the allocation of the cost on a product unit poses difficulties. An example of such an overhead cost is the Chief Executive Officer’s salary; this does not provide the management with appropriate reports on costs (Hansen, D. R., & Mowen, M. M. 2000). The ABC method allocates business costs to its products on a proportionate basis or based on assumptions. This translates into the generation of inaccurate reports on costs by the management. Affording the management accurate information