Cost and Effect

In this summary you will learn

• What activity-based costing is
• What its advantages are for both financial reporting and strategy
• How cost-accounting systems evolve in four stages

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Why you should read Cost and Effect

Robert S. Kaplan and Robin Cooper’s work on activity-based costing has achieved the status of a minor classic in managerial accounting literature. First published in 1997, it explained why activity-based costing has advantages not only for accounting, but also for management and strategy. Moreover, it linked the advantages of activity-based costing to what, at the time, seemed to be novel ideas about economic value added and enterprise systems. Nearly 10 years after its initial publication, the book seems surprisingly fresh and relevant (notwithstanding the authors’ enthusiasm for the “information age” and the potential of enterprise systems). The authors present the case for activity-based costing in a clear and straightforward manner. The book is well-organized and surprisingly free of jargon. getAbstract recommends it as a good introduction to managers who are new to the subject. Even those familiar with the concept and practice of activity-based costing may find useful reminders of basic principles in this book.

About the Authors

Robert S. Kaplan is Baker Foundation Professor at the Harvard Business School. Robin Cooper is a professor of management at the Peter F. Drucker Graduate Management Center at Claremont Graduate School and a visiting professor at the Manchester Business School.