<TITLE: Capacity Cost Accounting, Variability Accounting and Activity-based Costing
ACADEMIC DOMAIN: economics and administration
DISCIPLINE: accounting
EVENT TYPE: lecture
FILE ID: ULEC20A
NOTES: continuation of and continued in ULECD130, lecture interspersed with questions

RECORDING DURATION: 57 min 38 sec

RECORDING DATE: 13.4.2007

NUMBER OF PARTICIPANTS: 10

NUMBER OF SPEAKERS: 2

S1: NATIVE-SPEAKER STATUS: Finnish; ACADEMIC ROLE: senior staff; GENDER: female; AGE: 51-over

S2: NATIVE-SPEAKER STATUS: Danish; ACADEMIC ROLE: senior staff; GENDER: male; AGE: 31-50>


<S2> er thank you for inviting me to er have a speech here at the tampere university er together with <NAME S1> and we're going to present two papers here the first one which might be a little bit boring for you because it is has much danish er frameworks in it er but there's a comparison with activity-based costing it's written with a colleague er called poul israelsen from er from the other part of denmark jutland erm and it is focusing on er danish er recording frameworks especially because they have been challenging er what we have met from US and especially the activity-based costing er frameworks erm erm , i come from copenhagen business school i'm associate professor there at the moment i've been working in practice too in two big companies one big medical company called <NAME> you might know it it's one of the biggest companies in the world within insulin erm and i've been working in another company a production company called <NAME> which is a part of the big erm company in denmark called <NAME> so er and my interest area is management accounting er and account information systems which i have switched a little bit to er lately in my last publication so but i had the opportunity to stay in in erm the traditional management accounting and i think the two papers we are going to talk about and i hope that we are going to talk about that we are going to discuss the papers er on the way in my presentation , is within what i call the centre of management accounting the main part of of er of that erm if you're going to have some question or comments when i present things because some of the frameworks or one of them or both of them can seem odd to you who are not familiar with with the danish tradition don't hesitate to ask me if you want to put any questions about what i'm i'm telling here erm yes now i need @my my presentation@ but if you you check the content of the presentation here you can see i have seven i've split it into seven points which follow the er the outline of the article er accounting in scandinavia the northern lights here which is written for a a scandinavian er book edited by sten jönsson you may know him do you know sten jönsson yes and jan mouritsen who is from copenhagen business school too and they have tried to collect what might be seen as the mainstream research in the scandinavian er countries and it seems that if you are are taking that into account it seems that what is going on in scandinavia might be a little bit different from what we see going on in th- the united states or also in er UK and i will will start to to er read a few lines from a review made by a guy called robin roslender er he said <READING ALOUD> the only (xx) to emphasise that the (connection) is principal principally constituted by what UK readers would recognise as management accounting contribution although one only one paper is designated in this way seven are included in management and service section of the book </READING ALOUD> so the only paper which is considered to be management accounting in that collection here <S1 PREPARING POWERPOINT> <S1> sorry </S1> er is in fact the paper made by by poul israelsen and er and i erm . and further on they say the most technical of the 15 papers chapter 11 focus on two danish management accounting te- techniques variability accounting and capacity cost accounting , and what they they continue to say is that especially within financial accounting the research in the northern countries er in the nordic countries are quite much different from what is going on in in er in the UK er companies , erm , are we ready @@ </S2>
<S1> sorry </S1>
<S2> are we ready for </S2>
<S1> yeah i [yeah] </S1>
<S2> [okay] okay . <S1> [it's] </S1> [i'm going] to start to yeah </S2>
<S1> sorry <S2> [okay] </S2> [it's] friday the 13th </S1>
<S2> what </S2>
<S1> it's friday [and the 13th] </S1>
<S2> [yeah i know that i know that] @@ </S2>
<S1> @sorry@ </S1>
<P:05>
<S2> shall we wait i think it's a good idea to wait <PREPARING POWERPOINT> . there they are </S2>
<S1> okay now you </S1>
<S2> i'll then then i'll see if i can find the file so , okay and here we have the outline of the presentation i think we should start with (xx) erm the the purpose of and content of this article (we wrote) , for what we are doing in in in this article and that that might seem odd to you is that we in fact compare what has happened here here and here this is denmark this is zealand this is jutland and this is the US er at different times in fact what we are looking at is is er the ABC concept which is from 19- 19- 1987 the first time to see the the first birth of the activity-based costing the variability accounting which we are going to talk about is from the 50s to the 60s and the capacity cost accounting which is made where i come from from copenhagen business school is primarily the idea it's primarily fostered in the 70s to the 90s 95 maybe so so we might reflect on if if this might be relevant for us to to er to compare these things , now we continue , and that's where we start to present the bjornenak-olson framework are you familiar with that have you seen that before do you know bjornenak and olson bjornenak is professor of the norwegian school of economics and olov olson is professor of gothenburg -burg er university erm we'll go er continue with that because it's framing the article er to some extent and then we are going to to talk about the purpose and content of the capacity cost accounting and i start with that it's not the one we start with in in the paper but i think it's better to start there to set the the scene for what is going on and for the discussion of the three concepts we are going to to compare in my presentation then we are going to talk about the purpose and content of variability accounting framework , from my standpoint i think it's a little bit odd but it has been very popular also in finla- finland erm at a special time i think it was in the 70s or yeah 60s and the 70s and then we're going to make a comparison and a SWOT analysis of the two basic danish er frameworks , and then at last we'll try to compare them compare the ideas in the two frameworks with what what is going on in the activity-based costing so that's er the outline of the presentation and i hope that you on the way and after the presentation will have some questions and we can discuss some some of the the topics pres- presented here <USING POWERPOINT> , oh , erm here we have the idea of the olson bjornenak-olson framework and the main idea taking that into account is to make to try to unbundle what might be seen as a management accounting innovation and they what what they try to do with this framework is to to er uncover to whi- ex- which extent a management accounting technique or a management accounting idea is an innovation or not that's that's the main purpose of of er that and they try to to er focus on that in two dimension the first dimension they call the scope dimension i'll come into the content of that a little bit later on and the other one the system dimension the system dimension and the scope dimension <COUGH> . is broadly spoken what should we account for what should we account for that that that's the idea of the scope dimension and the system dimension is er how should we set the system up do we need only one system as we see in the ERP literature or should we have few or many systems subsystems er in it , it is again it's split into to er to er three topics one topic they call descriptive er objects which is the content of the system the content how deep do we for example record data in our accounting system is what we are talking about here and the second one is causal variability factor er how do cost vary to cost objects , er is is er this thing here and er er last the time and if i should write a little bit on on the whiteboard here <ORGANISING PAPERS, P:05> they <P:07> have the expectation that if you talk about conventional wisdom <WRITING ON MARKERBOARD> (xx) <P:10> conventional . wisdom <P:05> versus innovations . and they regard for example strategic management accounting and activity-based costing as examples of innovations whereas conditional conventional wisdom is for example traditional er cost allocation networks within er within accounting then they say that if we take the descriptive objects here they are in conventional wisdom few , whereas in innovations they are many . if we take the causal variability factors the cost variable rates for example erm is a is a good example of causal variability factors they again say that in conventional wisdom they are few and innovations they are many , if you take the number of the type of data <WRITING ON MARKERBOARD> type of data . type of data they are mostly in conventional system financial data only financial data . financial data whereas in in the innovations er they might might be or er there might be more non-financial datas . if you take the number of periods . they say here we work with one period and here we work with many and an example of of the last one is for example time costing life-cycle costing erm , if we talk about the division of time <WRITING ON MARKERBOARD, P:07> it is fixed . in the traditional way to look at at accounting and here it's variable . and finally if we take the time perspective and data here , they are prim- primarily time perspective . they are primarily ex-post data . whereas in in innovation they are more focused on ex-ante and here they use a balanced scorecard as an example of of er of er that so that's the idea of er of er this if we go to the system dimension then they talk about the number of systems and again they say and whe- when they're talking about innovations the number are of system are many which contradicts a little bit with the idea in traditional ERP system where we have one common system erm and the lifetime for for the innovation may be er ad hoc on ad hoc basis whereas when we talk about the er the conventional systems they are are erm more permanent continuous systems , user aspects that's the last one is about the (xx) involvement of er of the users (xx) and use of the system and here they they expect a new system where the user play a a a major role in deciding and and setting up the the system and also in the use of the systems so that's er that's the differences er that's what we are trying to to erm use as a framework to test to analyse the two danish er frameworks , erm , the first guy we are going to talk about is my old supervisor from my p- PhD er dissertation zakken worre and er zakken worre has played a v- very major role in especially erm in denmark he has he has played a role er within cost accounting and he has also played a major role if we are going to er to talk about er about er budgeting and i- his inspiration came from a guy a professor palle hansen who has played a role also here in finland or or in er and also in in some of the er other countries he was a traditional old professor erm , who did , very minor research he made a a a lot of text books and he did a lot of er consultancy er in in all the scandinavian countries or or the nordic countries i think he he also made some some er some er consultancy here in erm in in finland , so he was the the the main inspira- inspirational er source to er to er to to er but also herbert simon and i know that herbert simon do you know are you familiar with herbert simon , er played a ma- major role i think he did that in in both of the er the nordic countries at that time in the 60s and the 70s simon and march , and er it was especially the discussion about making rational choices and decisions er quite challenged the the the idea about the the economic er the economic (xx) and it played a major role regarding to the development of er of (xx) and planning in especially denmark but er you can also see from our common article that that er he played a role erm in s- in in er the other nordic countries as well erm . what we are going to focus on now is especially the last part er wha- sorry the first part about constructing the er cost accounting system and in that way i think , that zakken <WRITING ON MARKERBOARD> , sorry , had another idea of how we should construct a cost accounting system , if we take the conventional way to look at accounting from am- american perspective . the two-stage allocation procedure it starts with , say resources <WRITING ON MARKERBOARD, P:06> and then we we allocate the resources to different kind of customers <WRITING ON MARKERBOARD, P:07> and then again we try to , drive them down on cost objects <WRITING ON MARKERBOARD, P:07> erm , and from here to here you normally use one single allocation-based volume a volume driver so to speak if we take the the danish idea or the criticism fro- from zakken he doesn't like the idea of allocating cost because he finds it arbitrary it's very important the the the danish research or the danish theory within that area avoid arbitrary er allocations erm so therefore he (xx) he was of the opinion that we shouldn't drive cost er down using a er er common allo- allocation base so what he did instead is tried to look at a er a company as an in- input-output system <WRITING ON MARKERBOARD> . erm , input of resources transformation of resources and output , and that's er the dimension you need to describe in your recording system at least y- at least you have three dimension you have to describe the input factors you have to describe something about what is going on er the transformation and you have to describe what is coming out of the the process and that's how most er recording systems are build erm but what he he was er criticising was the transformation or what is normally called the cost centre <WRITING ON MARKERBOARD> . because , he was of that opinion that the cost centre couldn't at the same time cover what you would call responsibility <WRITING ON MARKERBOARD, P:07> and at the same time the processes in the organisation . the processes in the organisation so he split that er that dimension into two , so instead of having , three descriptive objects in the danish version we have four have have four erm which contradicts to what vagn madsen do which we sha- shall look on er later on erm what is very important for zakken and i think it's very important as a general statement that you use your recording system as a basis for communicating economic and non-economic events , you should see your your information system as erm a way to communicate data between people and therefore you have to have a very clear responsibility which he in his his er in the framework called information entrance which is a transla- translation of a danish word er information entrance and then he has the processes in the organisation as the second problem here , erm and it is important to state the last sentence we have here that the process dimension should not be used for cost allocation of fixed cost in a physical sense so it is not a er allocation system he is building , it's a database which can be used for different erm attention-directing and updating proc- er purposes in the organisation erm <USING POWERPOINT, P:07> if you take a closer look and we could do that here and then go go back again here here we have the idea and what zakken in this framework is focus- er focusing on is the capacity cost because er there doesn't seem to be many problem if we are talking about the variable cost it's not it's not it's not an issue which most most er system can can er handle that but if we are talking about the capacity cost and how we trac- trace capacity cost to different cost objects or to different departments , it is a challenge and the whole idea is that you try to classify cost erm <WRITING ON MARKERBOARD> . in relation to the four dimensions we have here , and especially the idea about variability is is very important because if you have cost the low variability you can't do much with them they don't vary with anything if you have cost the high variability <WRITING ON MARKERBOARD> . the thing that bjornenak-olson ca- er call causal variability factors then you can do something you can remove the cost or remove the resources behind the costs costs here that's that's er that's here the idea and erm if you take the factor type the resource what could that be if we're talking about capacity cost could you give examples of of that the factor types what could it be what is the . what could a factor type be the input be . the most common is salary <WRITING ON MARKERBOARD> . it could be insurance . it could be travel . could be advertising . et cetera <P:07> the idea is that you try to . make the the general ledger or the the er recording system in a way that you split cost with different er erm variability and reve- reversibility so you try to to er , how to say erm . you try not to mix mix er mix cost er whi- which has a different variability and reversibility in the same account that's that's er that's the whole idea erm , and what you then do is trying to see how how far can you drive them down into the system into the information entrance into the processes into the er the objective or the recipient er you have there , and if we we take a look in that part of the the figure here it's very important to er to show that if we t- er have cost with very low variability , then you only record cost in (xx) and (xx) units you don't do much more than that because you don't need to have a deep recording when you can't manage cost er that's that's the main idea if you can't do anything if you can't decide about the resources , then you you don't need a deep recording or registration of data , erm , so normally you can register the person for example you have melvin could we call him and you could er could register in which department he's working that's all and that's all which is interesting here , if we talk about cost with a high degree of variability it's quite di- different because then you try to describe the cost in relation to which processes they use and if we talk about processes erm for capacity cost we could take a accounting department a process in accounting department could be to er make a budget <WRITING ON MARKERBOARD> . it could be work on the general ledger . it could be finance management <WRITING ON MARKERBOARD, P:08> and so on , all the tasks you're doing in the organisation you try to s- describe that erm in that dimension erm <COUGH> and then you have the objective dimension which is a little bit special here because the objective dimension covers to whom are we doing that job who's receiving the output of our performance , that's that's the mai- main idea here so you're trying to see if you are er er accounting department who is who are we going to do the work for , in the organisation . to trace the consumption or the use of the resources in our department so to speak er and . that is from my point of view a little bit different to what we see when we are talking about er normal theory about chart of accounts and and er and recording recording systems do you agree with that , erm <P:06> if we take the the cost with high variability it's also important to to show that that we also register capacity utilisation units which is normally time the time or we could , register the load units or performance units which is the numbers and if we compare to activity-based costing this might be what they call duration drivers and this might what they call transaction drivers so it's the same idea as as they use in in the activity-based costing , erm , this one here and this one here means that if you have whole units , a person melvin melvin let's call him that who is doing more than one job or is performing erm for two departments for example then you can't split his salary into into the two jobs or into the two departments you're serving that's the main idea and tha- that's what we in denmark call direct accounting or direct posting of cost , you can't split units and the reason is if you remove one of the tasks you can't get rid of the whole resource you might only get rid of 50 per cent of his time that's er that's the idea in the construction of the database here so so what we are we are on the database level in in in er in the idea we have here , any questions comments , to that erm <P:08> yeah we can go on [to talk about] </S2>
<S1> [may i] ask er <S2> [yeah] </S2> [<COUGH>] about this capacity cost accounting how much er it influences today in denmark <S2> [mhm] </S2> [in cost] accounting is it in use these ideas are they in use in er some <S2> [mhm] </S2> [companies] in denmark </S1>
<S2> yeah i- it is in use in many companies in denmark in fact <S1> yeah </S1> and that's the reason why , activity-based costing have had had a hard time in denmark being accepted as an as an alternative because most of the danish companies and you see the same in the norwegian com- companies use the contribution margin method method <S1> yeah </S1> erm instead of activity-based costing for example and the reason might be we don't know it exactly <FOREIGN> men </FOREIGN> the reason but the reason might be that in denmark we have many small companies only a very few big companies and i think it is the same the same structure we have here in finland isn't it so you have nokia and then you have a lot of smaller companies it's the same structure in swe- er or sorry in norway but not in sweden in sweden you have many big companies that might be the reason for the contribution margin to be so popular er in in in these so so i would say that that many of these ideas are in use in in in in danish companies also because we teach them at @the copenhagen business school@ at the at the er bachelor level and first er first on the the graduate level we teach activity-based costing and er and er that type of of er new innovations , erm . it's also important to know and er to to er be aware of that the registration dimension or recording dimension should be seen as options rather than a straitja- jacket you don't need to post or record on every single of the dimensions here , if necessary you can record on these two dimensions at least and if it's relevant you can record on on any of of er of the dimensions . and sometimes you only record the data in in amounts or in time or in number of tasks er done and then can you outside the framework or the idea of the database you can compare the different dimensions for the purposes you want to analyse and make decisions on that's that's the main idea </S2>
<S1> <NAME S2> could you one more time to say something about this information entrance now i i lost the idea <S2> [yeah] </S2> [maybe] the st- students did er understand [better what what is was] </S1>
<S2> [yeah the information] yeah yeah it's it's normally you would say it could be a department <S1> yeah </S1> or it could be a work group or it could could be a person <S1> okay </S1> so , but zakken didn't want to mi- mix it up with the processes going on in the organisation so his he thought it was very important to split these two dimensions or split the cost centre dimension into two dimensions <WRITING ON MARKERBOARD, P:07> er then we have old vagn madsen variability accounting which to me seems to be one of the most odd @systems@ ever constructed erm but it has been very popular in in in the scandinavian countries and especially it has been popular in sweden in gothenburg there has been been a lot of research around that that concept in in gothenburg so so to some extent this tiny little book which is vagn madsen's <FOREIGN> <BOOK TITLE> </FOREIGN> has had a major impact at that time and erm in denmark and espe- especially the professor poul israelsen who had er continued working with with the variability accounting so he's a specialist i'm not because i , i'm a little bit critical about that concept not the idea but the the use in in practice if you t- if you take a a look at the idea it's very traditional in the outline you have the factor type as we have here you have the cost centre or department and you have the objective for the use of the resources , it's very important to be aware of that this system was constructed at a time where we didn't knew much about databases and IT it's very important to know and therefore he made the accounting hierarchical within the the different dimension he made hierarchies for example here the objective all products product groups product A and B , and here , the whole company er department A department B subdepartment X Y and so on er , he doesn't talk mo- much about it here because it's it's not so great <FOREIGN> men </FOREIGN> but but the idea of hierarchies is very important in the variability accounting there's another important thing which is different to what we have here that you need to post or record data in all three dimensions you have to put put all the data in all the dimensions , erm and what you do is that you measure the input quantity you multiply the in- input quantity with a standard price for example melvin has worked ten hours of this or that and then we we multiply it with a standard price of an hourly rate and then you get the cost in all three dimensions and this would be cost here of course that's the basic idea of this what is odd to me with the variability accounting is erm am i erm <USING POWERPOINT, P:06> ah . yeah i can see it , is that that the system is organised organised outside the accounting system , it's organised outside the accounting system so it hasn't has no reference to the accounting systems so you have to post the data in the general ledger and at the same time you have to post the data in in the variability accounting systems , and you don't see or vagn madsen don't tell anything about as far as i see it about the connection between the two , which is different to the the cost er cost accounting er or the capacity cost accounting model here which is is connected to the er normal book-keeping in the company erm so it's a little bit odd here so he he expects that you have a a normal accounting system and you have the variability accounting on the side , erm </S2>
<S1> but you say that it is one one single system i er would understa- [-stand that @@] </S1>
<S2> [yeah but yeah but but] a one si- single system but outside the <S1> [yeah] </S1> [the normal] accounting system , outside the so you you have to post in there so , erm , <USING POWERPOINT> oh sorry . yeah so it's organised as a single er system it is also a permanent system erm . which allows these er inspection on a periodic as well as er er ad hoc basis if we are going to make the comparison of the two systems , here , it's very er important to stress that both systems avoid arbitrary allocation and they're both they can both be seen as what we call basic recording systems so so in in that sense they are identical , erm another important thing is that there's no distinction in the variability accounting between accounting for variable cost and accounting for capa- capacity cost and the reason for that is that at that time vagn madsen didn't accept the distinction between variable and fixed costs , he was of that opinion that cost vary with the cost object and depending on what kind of cost objects you are looking at product product groups products in all different cost would vary vary with with that , when it comes to his later publication the budget book and the strategy and budget he changes his opinion and and uses the the contribution margin where you you er split into variable and capacity or fixed cost depending on the term- terminology you want to to er to use but zakken it's very important for him the whole the idea is the same in zakken the four dimensions but there's accounting for the variable cost and accounting for capacity cost in those in those systems , VA uses three recording dimensions this four , no use of hierarchies and the data database if we take the the capacity cost accounting and the reason for that is that we now have the idea about relational databases here which we didn't have at the time here erm . the VA records the actu- actual con- consumption in the form of quantity consumption kilo and litres and the time used and this is the same here erm . it's also important to know that this records consumption at standard rates so so you have recording es- ex-post but you multiply with the standard rates which might be seen as as ex-ante rates they are determined ex-ante so to speak records variability factors same here and erm yeah there's nothing more to say about about the two two systems okay <P:06> if we should make a comparison with er or look at the strengths and weak- weaknesses you might agree with me that the strengths in that system is that data are stored disaggregated in a common database in order to provide transparency and flexibility , erm we we will also claim poul and i that it has very lo- logical structure and it's very (stringent) in in its er outline erm and therefore we think that that the ideas (xx) ideas , that the ideas are good or they they appear as i- ideal models for design of cost cost accounting er systems . and the third strength is that that they have been have been used widely at different times in denmark and especially the variability accounting ideas have been used in jutland and the ideas of capacity cost accounting ha- has been have been used on on zealand where the two business schools are or the two universities are are placed so so yeah that's why </S2>
<S1> that's interesting er that er it's a question of the island <S2> [mhm] </S2> [@@] but is it that the different business schools are aarhus and copenhagen and erm i mean does this er have something to do with the education professors' interests or how can you say that in one island they use different accounting system and in another island another one </S1>
<S2> it's because at that time there were few professors at the business schools in denmark few leading professors you , vagn madsen was one of them in jutland or was might be the considered as the only one in jutland the only professor with some impact and at copenhagen business school you have palle hansen and zakken worre <S1> mhm-hm </S1> so so so that might be @the main@ reason for for the impact or practice and especially palle hansen had a consultancy er company which they called palle's circus in denmark because it travelled around in in er in the scandinavian countries especially and and had courses and lectures for for business people in er in in in practice so so that's a way the idea travelled so to speak erm <P:07> what we can agree about is and you'd er , i don't think you disagree with me that both of these concepts suffer from being very complicated concepts which are difficult to understand the basic idea is might be easy to understand but when when you're going to er when you're trying to to er implement it i- into practice it's very complicated it might be very er complicated <COUGH> and none of the systems has , very deeply been been tested in practice , i know some of the ideas also here in finland have been used but but i don't know you don't see a variability accounting system anywhere you can't find it in any company , and the same could be said about capacity cost accounting , and finally i think both the systems have very very weak link to IT at this point the capacity cost accounting might be better in in in that that sense . threats , one of the threats we see is if you have a very deep recording systems , it needs to be constantly updated when the environment is changing , so if , the main use would be where you have a stable environment and not a dy- dynamic environment because it's very complicated to update a very deep recording structure which is considered in in both of the systems erm , so so that might be the er the threat the opportunity or the challenge <USING POWERPOINT> oh sorry , ah . is that modern ERP systems but we don't know them yet provide an opportunity for implementing these concepts and that's what i'm trying with the (xx) to er to look at in ESAP if some of the ideas can be implemented fully in in er in in companies at the moment but none of us neither poul israelsen or me has done any work on that until now . erm yeah , and last we are going to talk about a little bit about activity-based costing you're all familiar with activity-based costing . are you also er famil- familiar with how activity-based costing started , the first model of activity-based costing well you start with actions whi- which er integrate into activities and try to trace activities to to erm to cost objects products customers services but this is the last version of of activity-based costing and we can see the reason why we compare with activity-based costing is that many of the building blocks in activity-based costing are the same as in the danish frameworks , you have the re- resource dimension here . you have an activit- er -ty dimension which mi- might be considered as the same as processes in the capacity cost accounting and you have a cost object dimension product service customers dimension so you have the same dimensions so what is the difference or why and why have , why has activity-based costing been challenged in in denmark to the extent as it er as it has <WRITING ON MARKERBOARD> erm . if we take a comparison , of the three models , using the the olson-bjornenak framework we can see er that the number of descriptive objects in the two danish systems are many if we're going to look at activity-based costing , we think that that there are fewer descriptive objects because it started with one products and move into many but you see a high aggregation in ABC because what is happening here at the resource level you take the gre- general ledger and you aggregate , and then you disaggregate again , and then you try to tra- trace to to products so it can be in the real world be very complicated to go from here back to here and to the resources , so decision-making about resources can in an activity-based costing be very complicated i've seen implementation where you work with four resource pools here only four resource pools and then split them into a m- many different activities and then you trace them to products services and customers <P:05> the danish system would regard that as arbitrary . erm in a sense if we take the the number of cost and variability factors or we could call them cost drivers , they are many in the two danish systems and they are also many in the activity-based costing in opposition to traditional er full cost accounting where you only use a single cost driver , type of data in the two danish system financial and non-financial data they can be char- characterised as internal data and there's a very high er degree of disaggregation in in both systems if you take the activity-based costing you can see that there are both financial and non-financial primarily internal data , er and the degree of aggregation depends primarily on the operational or strategic use as mentioned before , number of periods many in all the three systems division of time variable er time pe- perspective of data started ex-post and now balance between ex-post and ex-ante if we take erm the vari- variability accounting and that's because that poul who has written that part mostly he'd take the variability budgeting into the whole idea if we take the variability accounting it's mostly ex-post data the danish system is ex-post and if we take activity-based er costing started ex-post and moving more and more towards ex-ante activity-based (product costing) activity-based management erm number of system one (xx) basic recording system , the capacity cost accounting few but it's great in a database , and if you take activity-based costing many stand alone and eventually they will merge into one ERP system that depends on , how it is used in in practice . evidence ha- has showed that it is very complicated to merge activity-based costing into the ERP systems the research from from <NAME> here from finland shows that and and er <NAME> lifetime in the two danish systems are continuous if you take activity-based costing and it might be (xx) ex-post temporary and continuous , user involvement , er the capacity cost accounting smaller in the design phase higher in the use of the system variability accou- accounting high in the design phase high in the use and the same can be said about the activity-based costing er accept- acceptance of er information asymmetry low in the two danish systems high in activity-based costing . so we can see that many of the ideas which is covered in activity-based costing is already or at the same time if we take this point covered in the danish literature and that might be one of the challenges for getting for consultants to to implement activity-based costing in in in danish companies . <USING POWERPOINT> oh sorry , if we try to sum up or conclude i think that activity-based costing includes all the tasks that danish er recording frameworks intend to support although a few of them seem to have only one priority , the primary task of activity-based costing as i see it is attention-directing or what we in denmark call inspirational analysis and product costing , but the danish systems has also the idea of updating of data which is is not er w- which doesn't have a high priority in activity-based costing erm the main focus in ABC is the product costing attention yeah already said that , as regard to design and content the most important difference lies in the measuring scope and the extent of disaggregation and which data are stored and in that sense i see or we see that the danish systems are more demanding than activity-based costing . the danish systems are characters- er chara- characterised by being continuous while ABC implementation are of er temporary nature and therefore poul and i got the idea that capacity cost accounting might be a level one system a basic recording system while activity-based costing might be a level two or a level three system on top of the danish recording system so if , so what we we try to do is to continue to see if we can merge the the the the ideas to make er a more comprehensive system in in in a sense </S2>
