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Jul 2010

Contemporary management accounting practices in UK manufacturing

Prevailing wisdom in management accounting research suggests that absorption costing methods are widespread in manufacturing companies. However, some of our previous investigations revealed a number of companies using contribution margin methods of internal reporting.

Our findings from a document-based interviewing study of 41 manufacturing companies show that there is a rich diversity of contemporary UK reporting practices, that are constrained neither by the financial accounting requirements of SSAP9, nor by any sense of general management accounting trends. Instead, Financial Directors choose from a toolkit of ‘traditional’ and ‘innovatory’ practices in constructing reporting systems appropriate to their varied commercial needs. Within this diversity there is a strong leaning towards contribution margin approaches. These diverse reporting practices cover a wide range of management accounting techniques in relation to contribution, margin, profit, variances, budgets and forecasts.

This study reveals that companies often follow long-standing academic advice in structuring their internal Profit and Loss reporting on contribution lines.

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Contemporary management accounting practices in UK manufacturing