Journal of Accounting and Management Information Systems (JAMIS)

UVA method – an alternative to ABC method

Supp/2006 ,   p43..55

Mădălina BRĂESCU
Gabriel JINGA

Keywords:   UVA method, hidden constants, equivalence, customer cost, profitability curve, homogeneity, Balanced Scorecard

Cost accounting at international level became a growing area in the 70s. The will of permanent change according to management’s needs can be noticed in the evolution of cost calculation systems. Thus, a company that was using in the years 70-80 the traditional full-costing method could use ABC in the 80-90. No method is perfect; it is useful in a certain context. Critics of the traditional method especially refer to splitting the charges in fixed and variable, direct and indirect; choosing volume rates; bad analysis of fixed costs. Corroborating this with ABC’s problems (long implementation time, high cost, considerable efforts for updating) it results some room for a approach: UVA method (Unité de Valeur Ajouté), an improvement of GP method. Why can this be considered an alternative method?
UVA is considered a simple and cheap system. Its main target is simplifying cost analysis. It combines the natural involvement of engineers in calculation process with accountants’ knowledge. The method is looking forward to avoid the global treatment of costs by computing the profit obtained from each invoice. This can only be obtained through a precise study of the activity of value added: the method imagines a thorough analysis of all the processes involved in making a sale.
The vision brought by UVA method is completely different: it doesn’t work with profit centers but with processes split in operations; it uses a unique basic rate; it has a better information system then all the other methods; it solves the homogeneity problem with a simple system.