Accounting Article Review Paper on Performance Measurement and Costing System in New Enterprise


The article aims to describe the structure of measuring cost and performance in new forms of business organizations that are developing to rally the competitive challenges of the 21st century. Firms are interested in operating in all corners of the globe. For them to realize this ambition, they need to develop global strategies that can synchronize their operations at all phases of the value chain. Strategic performance measurements delineate the focus and scope of management accounting. For management accounting to be relevant in the competitive environment, its practices have to replicate and recognize choices made in organizations. A number of companies in every sector of the economy are examining ways of reducing cost, shortening product development time, and managing risks. Global competition has led companies towards a transformed commitment to brilliance. Attention to the quality of products and processes, workforce improvement, and inventory levels has presented a competitive edge for companies determined to be world class (Gunasekaran, James, and Ronald 524-25).

The authors assert that there are numerous challenges that face the management of new forms of organization but there are solutions presented. Proactive concepts such as Total Quality Management, Just-In-Time, Lean Production, Supply Chain Management, and Concurrent Engineering have become essential for companies that are seeking lean processes. Performance Based Costing (PBC) measures performance in areas of knowledge management and information system. The authors assert that, in today’s information age and with the growth of e-business, the technology is transforming old industries while creating new ones. Sustainability Analysis can be used to assess strategic advantage from the product perspective. Different approaches to conducting business have evolved in response to pressures created by a rapidly changing business environment (Gunasekaran, James, and Ronald 531).

                                                         Reviewer reaction

The study is theory-based and non-experimental. The authors have fulfilled fully the objective of the article. The article aims to describe frameworks for measuring costs and performances in the 21st century. The authors have discussed Activity Based Costing as one of the frameworks. ABC helps to identify problems and opportunities that influences accounting in the 21st century. It also formulates solutions to the problems. In so doing, the authors are fulfilling the objective of their research. In order to fulfill their objective, the authors have discussed the use of Performance Based Costing. The systems encourage proactive instead of reactive responses to customers, markets, and partners. Furthermore, the system promotes agility and creates wealth. What is more, the article has established a framework for measuring performance in new enterprises. Supply Chain Management coordinates activities between firms (Gunasekaran, James, and Ronald 525).

The article is not general. It provides evidence of every point that is mentioned. The arguments of the article are well presented and flows in a logical manner. The authors have used scholarly sources to back up their points. The authors have provided an abstract that gives the reader a glimpse of what the article is talking. The introduction has a thesis statement of the topic and it is discussed in the body of the paper backed up with several studies. The article has a strong conclusion that reaffirms that thesis statement and provides a summary of the article. In essence, the study is well organized and any reader can follow with ease.    

Relevancy of the article

            The article is quite relevant in cost/management accounting. Global competition has brewed the need for new costing and performance measurements and the article has addressed the problem. New systems and approaches in cost/management accounting are needed because the traditional costing systems do not provide sufficient non-financial information. In addition, the existing product costing systems are not accurate. The current costing systems do not support improvements and overhead costs are predominant. The article is quite relevant because it identifies critical success factors, develops metrics and measures, and highlights how such measures can be used to plan and control operations to enhance organizational performance enhance competitiveness (Gunasekaran, James, and Ronald 528)

            In addition, the article has addressed new pressures approaches, and enterprises for the 21st century. Supply Chain Management has been discussed in the article as one of the new approaches. It makes instantaneous improvements to business strategies and operations. Supply chain is made up of several layers of business units that make the efforts of cost/management accounting easy. The article has designed a Performance Based Costing system that focuses on the performance of the organization in terms of financial and non-financial activities rather than mere activities. This helps to get rid of unclear product cost information that is produced by appliance of traditional costing system. The basic principle of PBC is to make out business areas that add value to an organization and work out on direct materials, overheads, and labor. Traditional cost accounting methodologies do not have the capabilities to capture the value of some of the value creating activities that are involved in ERC. PBM offers cost and operating information that mirrors the horizontal view of accounting practices (Gunasekaran, James, and Ronald 529).


Gunasekaran, Angappa, James Williams, and Ronald McGaughey. “Performance measurement and costing system in new enterprise.” Technovation 25.5 (2005): 523-533.