Final answer:
Many firms have moved from Activity-Based Costing (ABC) to value stream accounting due to the complexities and resource intensiveness of ABC. Value stream accounting offers a simplified approach that aligns with lean principles and can help avoid diseconomies of scale that come with large and complex operations.
Step-by-step explanation:
The question concerns why many firms have abandoned Activity-Based Costing (ABC) in favor of value stream accounting. ABC can introduce significant complexities due to its detailed approach to allocating costs based on activities that drive costs. It requires identifying and evaluating numerous cost drivers, which can be resource-intensive and complex for businesses. In contrast, value stream accounting simplifies this process, focusing on the value creation flow and reduces the overhead of detailed tracking.
Companies may struggle with ABC when it comes to large-scale operations, leading to diseconomies of scale, where increased size and output levels result in higher average costs. This complexity can compromize efficiency and competitiveness, especially when compared to value stream accounting that promotes leaner, more streamlined processes. Thus, for many businesses, the simplification and focus on direct value generation make value stream accounting more attractive than the granular and often cumbersome ABC method.