Gmat Essay

680 Words Feb 25th, 2014 3 Pages
Article summary for Tom Kennedy and John Affleck-Graves on
The Impact of Activity-Based Costing Techniques on Firms Performance
Janetha Brown
This article discusses how a management accounting system like activity-based costing (ABC) may or may not have a significant impact on a firm’s value. With the samples that are shown, it is proven that the companies that use an ABC technique outperform other companies that don’t use an ABC technique by 27% over a three year period. It also shows that using an ABC technique will add value to the firm through better cost control and asset utilization. Because it had never really been proven that an ABC process really does bring an increase in shareholder value through increased profits, it is being
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Whenever research is being done to prove a fact, it is very important to know that how the research is done and where the data came from is very important to justify whatever the outcome is. The next section goes into detail on how the research is done and where the data was collected.
Next, they discuss the research results as well as the additional robustness test that are performed to show that the superior returns earned by ABC firms are not a result of matched sample method. There are four robustness checks that are performed. They are first compare the performance of the ABC firms with the FTSE-100 index, second track the performance of the ABC firms and their matched counterparts in the two-year period prior to adoption of ABC; third provide a comparison between the ABC and the non-ABC firms and fourth compare the occurrence of other strategic-based measures of performance.(Kennedy, et, 2001, p. 31)
Even the final comparison between the ABC firms and non-ABC firms significant corporate events of things like capital raised, acquisitions or divestitures, did not show any differences.
The final conclusions states,” the goal of ABC is to increase profits, not to obtain more accurate cost. ABC may provide a richer information base that leads to new management but it is