Coverage of Criticism of Activity-Based Costing in Canadian Textbooks

Textbook authors and publishers face a difficult decision regarding coverage of activity-based costing (ABC). ABC could be presented in strictly positive terms because it enjoyed immense popularity when it was introduced in the 1980s, and it is still presented in favourable terms in practitioner journals. On the other hand, it is possible to criticize ABC on practical and theoretical grounds. In practice, surveys report that ABC adopters are a minority of firms and that there are indications of dissatisfaction among users, and in theory ABC requires direct proportionality and the absence of common costs (Noreen 1991), which are difficult conditions to meet. A decision must be made regarding the extent of critical material to include; too little coverage leaves students unaware of significant limitations, and too much may confuse them. We describe the practical and theoretical material supporting criticism of ABC that is available to be cited by textbook authors and review coverage in five Canadian textbooks.