Interpreting Average Cost
Recently the American Institute of Certified Public Accountants (AICPA) and the Hackett Group, a consulting firm, partnered to study the trends in the nature and amount spent on the accounting function in corporations. A key finding was that the world’s best accounting departments were able to function effectively at relatively low cost; these department’s total costs were only about 1 percent of their firm’s total revenues. In contrast, less efficient accounting departments required on the average 1.4 percent of total revenue, 40 percent higher. The world-class accounting departments were also faster in preparing regular financial reports (less than two days for the best departments, compared to five to eight days for the others). The study also found that larger firms spent less on accounting:
Manufacturing Firms | Finance Cost as a Percent of Total Revenue |
Firms with less than $1 billion in revenues | 1.6% |
$1 billion to $5 billion | 1.4% |
More than $5 billion | 1% |
Service Firms |
|
Less than $1 billion in revenues | 2.1% |
More than $1 billion | 1.6% |
Required Give a brief critical review of these research results. What questions would you have for the researchers who presented these results?
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