Letters to the editor.

I enjoyed reading Thomas Corbett's "Three Questions Accounting" (April 2006). I think both sides are right in his second sentence: "Some people have called it a new paradigm in management accounting, but others have said that it's simply a new way of showing old cost accounting concepts, such

Corbett states at the beginning:

"Throughput Accounting is only concerned with the relevant costs and revenues associated with a decision." This fits perfectly with Horngren's definition of relevant costs and revenues: "Relevant costs are expected future costs and relevant revenues are expected future revenues that differ among alternative courses of action being considered (Horngren's Cost Accounting: A Managerial Emphasis, 12th edition, 2005, p. 380).

Corbett's inset illustration is clear. He could've used Horngren's relevant revenues and costs terminology:

                         Alt 1        Alt 2

Relevant revenues      R$ 103,320   R$ 67,680
Relevant expenses      R$ 15,000    R$ 15,000
Differential profit    R$ 88,320    R$ 52,680

Both Corbett and his critic, B. Douglas Clinton, (June 2006) discuss the dangers of oversimplification here. I take issue with Clinton's conclusion: "Finally, TOC [theory of constraints] is referred to as a 'management accounting system...,' an assertion that seems overly ambitious given the host of decisions for which it apparently cannot provide adequate decision support information."

Horngren also discusses potential problems using relevant-cost analysis. He analyzes a wide variety of decision-making problems with both a relevant-cost analysis and with a total-cost analysis. In my teaching, I use the relevant costs and revenues approach exclusively notwithstanding potential problems. Maybe this is why I like Corbett's paradigm.

Corbett is expanding the knowledge of cost accounting and is giving instructors like me more material to teach. Hopefully this will lead to better decision making. Corbett is making an important contribution to management accounting.