Activity Based Costing: Success is in the Eye of the Beholder

The literature on Activity Based Costing (ABC) tends to define the ‘success’ of an ABC system in relation to the decision-making and strategy formulating opportunities it provides based on the ‘logic’ or technical attributes of ABC (Shields, 1995; Malmi, 1997). This paper argues that there is a logic of ABC and tries to identify and illustrate how people relate to, misunderstand and still ‘appropriate’ this logic and start “talking accounting”. This paper shows that the ABC system implemented in this organisation did indeed provide information for decision-making and did to some extent support the logic of ABC. The paper also shows how this knowledge was emergent, the logic was articulated, but not fully understood and it was only when the system was implemented that many attributes of the system were recognised and, in some cases misunderstood. The paper argues that the ‘success’ of this particular ABC system was dependent on the organisational context, and the changing context as well as the logic. This is reflected in the change in attitudes, awareness and understanding of costs in the department where it was implemented.