Book Review: Revenue and Cost Management For Service Organisations
Reviewer: Ralph Adler, Otago University
This book discusses the topic of revenue and cost management, with a primary focus on service organisations. It is a slightly revised and updated version of its predecessor and first edition, which was published in 2005. The primary audience for this book would be advanced management accounting students, likely to be in their final year of undergraduate study. In writing this book, the textbook’s authors, Maguire and Rouse, wish to bring further attention to the need for accountants to look not only at the cost side of business issues, but the revenue side as well. Generally speaking, Maguire and Rouse are right; accounting textbooks often emphasise cost issues relative to revenue issues. As such, Maguire and Rouse are trying to educate students about the dangers of being “penny-wise but poundfoolish,” as well as point out the opportunities that a revenue approach affords.
The book is centred around a conceptual model that appears in the Preface. This model explicitly notes the importance of both revenue and cost management for ensuring organisational effectiveness. Using this model, the book is organised into nine main chapters, along with an introductory and a concluding chapter. Most chapters are between 10-20 pages and include end-of-chapter problems and the reprint of a relevant journal article.
The book has much to commend it. Firstly, the book adeptly draws upon the fields of economics, operations management, marketing, and management accounting in its descriptions and discussions. Secondly, the book’s underlying conceptual model serves as both a useful roadmap and a clever pictorial representation of the linkages among the book’s topics. Thirdly, the topics themselves are faithfully represented, and the discussions provided are usefully illustrated with relevant, often New Zealand-based, examples. As noted above, the book could usefully feature in an advanced management accounting course. Teachers thinking of adopting the book should, however, be aware that there are some typos that require pointing out to students to avoid confusion. Also, teachers may find that they want to change the sequencing of the topics. For example, instead of waiting until near the end of a course to present management control issues, some teachers may find it more useful to use management control as the primary lens to view the topics of revenue and cost management. For example, if one starts from the premise that management control is “the process of assuring that the organisation does what management wants” (Anthony, 1956), then such topics as yield management and cost management can be viewed as logically ensuing techniques for seeing that this occurs. Or alternatively, it is possible to see target cost management as the unifying force for the book’s collection of topics. In particular, since target cost management is as much about controlling costs as it is about ensuring the orderly succession of new generations of products/services - including the pricing of these (Tani et al., 1994), then target cost management could also usefully serve as the main lens of study. Revising the topic presentations in either of the manners just specified will require the teacher to add significant further content and readings than currently exists. of course, as Maguire and Rouse acknowledge on p 260, their book has mostly “merely skimmed the surface.” Accordingly, students will need to be introduced to the richer meanings and practices of management control or target cost management if one of the revised presentation methods is to succeed.
In summary, Maguire and Rouse’s book offers students good insights into revenue and cost management techniques that can be usefully adopted by service organisations. The book’s authors have a good grasp of the techniques they showcase. Furthermore, it is apparent that the authors had fun when writing the book. The attentive reader will find various incidents of their sense of humour scattered throughout the book, as, for example, on page 25 when they parody the technical language often adopted by wineries to describe their product. Accordingly, readers can count on being treated to a technically sound book that additionally, features humorous asides which are helpful for students who don’t see the business of accounting in a particularly appealing light.