Accounting Lag: The Obsolescence of Cost Accounting Systems

Contemporary changes in the organization and technology of manufacturing operations have caused the traditional, direct-labor focused, cost accounting system to be a less useful summary of a company's manufacturing operations. A select set of manufacturing firms, leaders in both high-technology growth industries and highly efficient innovative producers in mature industries, were visited in order to learn what changes were being made in their accounting, measurement, and control systems to support the current emphasis on new product and manufacturing technologies. While each firm was making significant changes in its manufacturing processes, comparable changes were not occurring in its accounting and control systems—except, perhaps, on a preliminary and experimental basis. This article concludes with some conjectures as to why the pace of innovation in management accounting systems is lagging behind the rate of change in the organization and technology of manufacturing operations.