Reviewed by Lane K. Anderson Texas Tech University

The author defined direct costing as having three essential features. Direct costing is:

. . , an accounting technique which: (a) is based on the dif-ferentiation between fixed and variable costs; (b) is fully in-tegrated into the general accounting system; and (c) gives rise to a multi-step income statement based on the differentiation between fixed and variable costs.

The study is organized into four parts, with each part subdivided into sections corresponding to the three essential elements of the definition. Parts three and four, in addition, review the use of direct costing for planning, control, and reporting purposes.

Part one discusses the nature of direct costing as it appeared in the accounting literature of the United States and foreign countries. Part two presents the development of the basic techniques used in direct costing, with special emphasis on the accounting literature in the United States. Here, the author examines the techniques for separating fixed and variable costs and the development of the flexible budgeting concept. Part three looked at the development of direct costing just prior to World War II. The author dwells on the contributions of Jonathan N. Harris, who was probably the first one to highlight the issues of direct costing for internal reporting in the American accounting literature. Part four discusses the development of direct costing from the end of World War II to the early 1960s. The major development was in the format and detail of an income statement under the direct costing approach.

Throughout the study, the author considers all of the issues in favor of and opposed to direct costing for internal and external pur-poses. He does not, however, organize this material to highlight these issues so that a reader can evaluate each one and form a position about direct costing.

The author defined direct costing as consisting of three elements, and he organized the material to discuss each of them. It becomes painfully clear that his discussion of the separation of variable and fixed costs and the integration of cost accounting and financial accounting is superficial. Rather, his discussions center on the income statement reporting format under direct costing. He leaves the impression that the major difference between direct costing and absorption costing is the contribution approach to an income statement. His emphasis is appropriate if direct costing is for internal purposes only. The study also lacks the evolution, issues, and conceptual arguments to justify direct costing for external reporting purposes.

In conclusion, this study identifies and summarizes the major sources in the accounting literature. For the serious student of direct costing, this study provides interesting and provocative reading.