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During the second half of the nineteenth century, managerial accounting development in Germany was based on micro-economic theory. In the twentieth century, the emphasis shifted to techniques and later to determination of “true cost”, resulting in a highly developed system that had a major impact on other European countries. The major difference between the German developments and those in the USA is the separation of cost (consumption/utilization of physical resources) from expenses. After WWII, interest centered on cost theory based on limitational rather than substitutional production functions. Gutenberg demonstrated various cost adaptation patterns as managements responded to output changes and created a sophisticated theory using indirect rather than direct output/cost relationships. This theory is little know in the USA and might stimulate theory research, particularly in the area of activity costing.

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