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The Evolution of Standard Costing in the U.K. and U.S.: From Decision Making to Control

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  • Richard K. Fleischman
  • Thomas N. Tyson

Abstract

Decision making and control are two fundamental components of industrial management that are aided by accounting information. This article traces the evolution of standard costing in the U.K. and U.S. and describes how it has served these two purposes over time. At the start of the industrial revolution, standard costing, in the form of past actual costs, aided managers in make‐or‐buy, pricing, outsourcing and other routine and special decisions. In the late nineteenth century, as the mass production of homogeneous products became more common, predetermined, norm‐based standard costs were promoted as the means to control operations and reduce waste. The use of predetermined costs was recommended by both academic and professional branches well into the twentieth century. Since the mid‐1980s, norm‐based standards have come under fire for not providing appropriate strategic signals in an era of global competition, continuous improvement and perpetual cost reduction. This article compares the nature of standard costing practices in the British Industrial Revolution with those that evolved in the U.S. under scientific management. The enquiry is not limited to double‐entry systems and, like Miller and Napier (1993), the domain is broadened to include other forms of cost‐keeping practices. We utilize primary and secondary sources to argue that the environment and rationales for standard costs have changed fundamentally over time. It is speculated that in the future standard costing will be used far less for individual accountability or operational control, but will return to its decision‐making roots in the form of long‐run cost targets that benchmark the success of continuous cost‐reduction efforts.

Suggested Citation

  • Richard K. Fleischman & Thomas N. Tyson, 1998. "The Evolution of Standard Costing in the U.K. and U.S.: From Decision Making to Control," Abacus, Accounting Foundation, University of Sydney, vol. 34(1), pages 92-119, March.
  • Handle: RePEc:bla:abacus:v:34:y:1998:i:1:p:92-119
    DOI: 10.1111/1467-6281.00024
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    Cited by:

    1. A. Fleming & S. McKinstry & K. Wallace, 2000. "Cost accounting in the shipbuilding, engineering and metals industries of the West of Scotland, ‘The Workshop of the Empire’, cl900–1960," Accounting and Business Research, Taylor & Francis Journals, vol. 30(3), pages 195-211.
    2. Carmona, Salvador & Ezzamel, Mahmoud & Gutiérrez, Fernando, 2004. "Accounting History Research:Traditional and New Accounting History Perspectives," De Computis "Revista Española de Historia de la Contabilidad". De Computis "Spanish Journal of Accounting History"., Asociación Española de Contabilidad y Administración de Empresas (AECA). Spanish Accounting and Business Administration Association., issue 1, pages 24-53, December.
    3. Schaltegger, Stefan & Burritt, Roger L., 2010. "Sustainability accounting for companies: Catchphrase or decision support for business leaders?," Journal of World Business, Elsevier, vol. 45(4), pages 375-384, October.
    4. Haka, Susan F. & Heitger, Dan L., 2004. "International managerial accounting research: A contracting framework and opportunities," The International Journal of Accounting, Elsevier, vol. 39(1), pages 21-69.
    5. Derek Matthews, 2002. "The use of the postal questionnaire in accounting history research," Accounting History Review, Taylor & Francis Journals, vol. 12(1), pages 113-129.
    6. McBride, Karen, 2021. "A French connection; paths to a ‘new system’ of accounting for the Royal Navy in 1832," The British Accounting Review, Elsevier, vol. 53(2).
    7. Xu-dong Ji, 2003. "Concepts of cost and profit in Chinese agricultural treatises: with special reference to Shengshi Nongshu and Pu Nongshu in the seventeenth century," Accounting History Review, Taylor & Francis Journals, vol. 13(1), pages 69-81.
    8. Roger L. Burritt & Stefan Schaltegger, 2010. "Sustainability accounting and reporting: fad or trend?," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 23(7), pages 829-846, September.
    9. Matthias Walz & Edeltraud Guenther, 2021. "What effects does material flow cost accounting have for companies?: Evidence from a case studies analysis," Journal of Industrial Ecology, Yale University, vol. 25(3), pages 593-613, June.
    10. Sam Mckinstry, 1999. "Engineering culture and accounting development at Albion Motors, 1900-c.1970," Accounting History Review, Taylor & Francis Journals, vol. 9(2), pages 203-223.
    11. Eva Carmona & Donato Gomez, 2002. "Early cost management practices, state ownership and market competition: the case of the Royal Textile Mill of Guadalajara, 1717-44," Accounting History Review, Taylor & Francis Journals, vol. 12(2), pages 231-251.

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