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Home > Performance Management Finance Library > Cost and Effect: Using Integrated Cost Systems to Drive Profitability and Performance

Performance Management Finance Library

Cost and Effect: Using Integrated Cost Systems to Drive Profitability and Performance

Robert S. Kaplan and Robin Cooper (1997)

Why Read It?

  • Two highly respected academics present a resource for understanding and implementing activity-based cost management, and show how to improve company profits and performance.

  • Provides a detailed blueprint to enable managers to make better decisions and to promote organizational learning.

  • Explains why activity-based costing has great benefits, not only for accounting but also management and business strategy.

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Getting Started

Cost and Effect demonstrates how the principles of activity-based costing and other advanced cost management techniques, such as target and kaizen costing, can drive business performance. It can be seen as a guidebook for managers to gain benefits from these techniques. Thought of as a classic in managerial accounting literature, the book helps the business and finance communities rethink how a company should handle cost.

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Robert S. Kaplan (b. 1940) is professor of leadership development at Harvard Business School, and chairman of the Balanced Scorecard Collaborative. He has previously been on the faculty and dean of the business school at Carnegie Mellon University, and has received numerous awards.

Robin Cooper is a professor at Goizueta Business School, Emory University, and was formerly professor of management at Claremont University. He was previously on the faculty of the Harvard Business School, and is a fellow of the Institute of Chartered Accountants in England and Wales.

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  • Focuses on the need for accurate financial reporting and cost management, by integrating financial reporting processes built around activity-based costing.

  • Assists in determining where improvements in quality, efficiency, and productivity will have the highest payoffs.

  • Offers practical guidance on negotiating more effectively on price, product features, quality, delivery, and service.

  • Uses examples from leading companies to show how to create integrated, knowledge-based systems that provide meaningful information on performance.

  • Examines how to design products and services that meet customers’ expectations, and that can be produced and delivered at a profit.

  • Explains how cost and performance measurement systems can enhance organizational profitability and performance.

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  • Reveals that most managers don’t know how to measure accurately, influence, or understand the fundamental cost drivers in their businesses.

  • Analyzes the different systems in managerial cost accounting, and presents quality and productivity improvement systems such as TQM and Six Sigma that could contribute to company performance.

  • Shows how to integrate activity-based cost systems into reporting and budgeting processes.

  • Links the advantages of activity-based costing to economic value added and enterprise systems.

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We use two powerful concepts…that enable the finance function to shift from being the passive reporter of the past to a proactive influencer of the future.

In today’s highly competitive environments, it is not enough to be the most efficient player; it is also necessary to be part of the most efficient supply chain.

[We provide a] guided tour for how companies can migrate from inadequate, traditional cost systems to a destination where cost and performance measurement systems are explicitly designed to produce the right information at the right time for essential managerial learning, decisions, and control.

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Further reading


  • Cokins, Gary. Activity-Based Cost Management Making it Work: A Manager’s Guide to Implementing and Sustaining an Effective ABC System. Chicago, IL: Irwin Professional Publishing, 1996. Explains how and why you should implement an effective ABC management system.
  • Kaplan, Robert S., and Steven R. Anderson. Time-Driven Activity-Based Costing: A Simpler and More Powerful Path to Higher Profits. Boston, MA: Harvard Business School Press, 2007. Provides a model for managers wanting to estimate the resource demands imposed by each transaction, product, or customer.

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