Cost Accounting and Simulation: Toward a Post-Structuralist Understanding

Abstract

Purpose

This chapter takes a critical perspective on the conventional wisdom that more advanced cost allocation methods have the potential to provide a more accurate picture of “true” cost, inevitably leading to optimal product mix and pricing decisions, and ultimately to greater profitability.

Methodology

Two concrete examples of the growing divergence between cost accounting theory and practice – the failures of activity-based costing and the reciprocal method of service department cost allocation to take root in practice – are examined through the lens of post-structuralist literary theory.

Findings

The findings suggest that economic truth has been devoured in an accounting simulation. The accounting model no longer reflects any profound economic reality; it precedes reality.

Research/practical implications

Much of the mainstream management accounting literature remains theoretically grounded in the belief that ‘true’ cost exists, as an object, which is revealed through our cost accounting systems. This chapter raises serious questions about this foundation, and therefore the practical applicability of a great deal of research.

Social implications

Society has granted the accounting profession a great deal of responsibility and autonomy, largely on the confidence that it has historically provided an objective and truthful model of economic reality. The findings in this chapter suggest that the basis for the accounting profession’s preferential charter in society ought to be critically examined.

Originality/value of paper

At a time where research has advanced toward an ever-narrower focus on self-referential tautologies and ever more complex modeling techniques, this chapter provides a new and stimulating, albeit provocative, perspective to yet unresolved issues in management accounting research and practice.

Citation

Hutchinson, R. (2014), "Cost Accounting and Simulation: Toward a Post-Structuralist Understanding", Advances in Management Accounting (Advances in Management Accounting, Vol. 22), Emerald Group Publishing Limited, Leeds, pp. 159-183. https://doi.org/10.1108/S1474-7871(2013)0000022012