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The Impact of Activity‐Based Costing on Managerial Decisions at Insteel Industries—A Field Study

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  • V.G. Narayanan
  • Ratna G. Sarkar

Abstract

In this field‐based study, we interview top‐ and middle‐level managers at Insteel Industries and conduct statistical analysis of firm‐level data in order to shed light on whether activity‐based costing (ABC) provides new information to managers and whether activity‐based management (ABM) significantly influences product and customer‐related decisions. We find that after the ABC analysis, Insteel undertook a number of process improvements that resulted in significant cost savings. Additionally, Insteel displayed a higher propensity to discontinue or increase prices of products and discontinue customers that were found comparatively unprofitable in the ABC study. Thus we provide empirical evidence that ABC influences both strategic and operational managerial decisions.

Suggested Citation

  • V.G. Narayanan & Ratna G. Sarkar, 2002. "The Impact of Activity‐Based Costing on Managerial Decisions at Insteel Industries—A Field Study," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(2), pages 257-288, June.
    • Handle: RePEc:bla:jemstr:v:11:y:2002:i:2:p:257-288
    DOI: 10.1111/j.1430-9134.2002.00257.x
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    References listed on IDEAS

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    1. Foster, George & Gupta, Mahendra, 1990. "Manufacturing overhead cost driver analysis," Journal of Accounting and Economics, Elsevier, vol. 12(1-3), pages 309-337, January.
    2. Banker, Rajiv D. & Potter, Gordon & Schroeder, Roger G., 1995. "An empirical analysis of manufacturing overhead cost drivers," Journal of Accounting and Economics, Elsevier, vol. 19(1), pages 115-137, February.
    3. Seungjin Whang, 1989. "Cost Allocation Revisited: An Optimality Result," Management Science, INFORMS, vol. 35(10), pages 1264-1273, October.
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    Cited by:

    1. V. G. Narayanan, 2003. "Activity‐Based Pricing in a Monopoly," Journal of Accounting Research, Wiley Blackwell, vol. 41(3), pages 473-502, June.
    2. Fayard, Dutch & Lee, Lorraine S. & Leitch, Robert A. & Kettinger, William J., 2012. "Effect of internal cost management, information systems integration, and absorptive capacity on inter-organizational cost management in supply chains," Accounting, Organizations and Society, Elsevier, vol. 37(3), pages 168-187.
    3. Ildikó Réka CARDOS & Stefan PETE & Vasile Daniel CARDOS, 2012. "An Overview On The Adoption And Implementation Of Activity - Based Costing In Practice," Romanian Journal of Economics, Institute of National Economy, vol. 35(2(44)), pages 185-200, December.

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