IDEAS home Printed from https://ideas.repec.org/a/eee/aosoci/v33y2008i6p582-602.html
   My bibliography  Save this article

The interplay between cost accounting knowledge and presentation formats in cost-based decision-making

Author

Listed:
  • Cardinaels, Eddy

Abstract

Most studies on cost-based decision-making examine the profit impact of cost reports that rely on different methods to allocate costs. In practice, firms' cost reports often employ the same cost allocation method with subtle variations in the way that the cost data are presented. This paper examines experimentally the profit impact of a cost report's presentation format in relation to a decision maker's level of cost accounting knowledge. Using a customer profitability report prepared using activity-based costing and presented in either a tabular or a graphical format, participants analyze a complex pricing and resource allocation task that affects firm profitability. The results suggest a strong relation between presentation format and cost accounting knowledge. Specifically, decision makers with a low level of cost accounting knowledge attain higher profits when they use a graphical format in comparison to a tabular format. More surprisingly, graphs (versus tables) have an adverse effect on profits for users with a high level of cost knowledge. This result has broad implications: in order to facilitate the decisions of a variety of users of accounting data (e.g. managers, external investors, etc.), firms may need to adapt the presentation format of their accounting data to the level of accounting sophistication of the users.

Suggested Citation

  • Cardinaels, Eddy, 2008. "The interplay between cost accounting knowledge and presentation formats in cost-based decision-making," Accounting, Organizations and Society, Elsevier, vol. 33(6), pages 582-602, August.
  • Handle: RePEc:eee:aosoci:v:33:y:2008:i:6:p:582-602
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0361-3682(07)00046-3
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wood, Stacy L & Lynch, John G, Jr, 2002. " Prior Knowledge and Complacency in New Product Learning," Journal of Consumer Research, Oxford University Press, vol. 29(3), pages 416-426, December.
    2. Alba, Joseph W & Hutchinson, J Wesley, 1987. " Dimensions of Consumer Expertise," Journal of Consumer Research, Oxford University Press, vol. 13(4), pages 411-454, March.
    3. Rose, Jacob M. & Wolfe, Christopher J., 2000. "The effects of system design alternatives on the acquisition of tax knowledge from a computerized tax decision aid," Accounting, Organizations and Society, Elsevier, vol. 25(3), pages 285-306, April.
    4. repec:bla:joares:v:17:y:1979:i:1:p:205-224 is not listed on IDEAS
    5. Mauldin, Elaine G. & Ruchala, Linda V., 1999. "Towards a meta-theory of accounting information systems," Accounting, Organizations and Society, Elsevier, vol. 24(4), pages 317-331, May.
    6. Stone, Dan N. & Hunton, James E. & Wier, Benson, 2000. "Succeeding in managerial accounting. Part 1: knowledge, ability, and rank," Accounting, Organizations and Society, Elsevier, vol. 25(7), pages 697-715, October.
    7. Waller, William S. & Shapiro, Brian & Sevcik, Galen, 1999. "Do cost-based pricing biases persist in laboratory markets?," Accounting, Organizations and Society, Elsevier, vol. 24(8), pages 717-739, November.
    8. Luft, Joan, 1994. "Bonus and penalty incentives contract choice by employees," Journal of Accounting and Economics, Elsevier, vol. 18(2), pages 181-206, September.
    9. William Remus, 1987. "A Study of Graphical and Tabular Displays and Their Interaction with Environmental Complexity," Management Science, INFORMS, vol. 33(9), pages 1200-1204, September.
    10. Vicky Arnold & Philip A. Collier & Stewart A. Leech & Steve G. Sutton, 2004. "Impact of intelligent decision aids on expert and novice decision-makers' judgments," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(1), pages 1-26.
    11. Bonner, S. E. & Libby, R. & Nelson, M. W., 1997. "Audit category knowledge as a precondition to learning from experience," Accounting, Organizations and Society, Elsevier, vol. 22(5), pages 387-410, July.
    12. repec:bla:joares:v:28:y:1990:i::p:1-20 is not listed on IDEAS
    13. Libby, Robert & Luft, Joan, 1993. "Determinants of judgment performance in accounting settings: Ability, knowledge, motivation, and environment," Accounting, Organizations and Society, Elsevier, vol. 18(5), pages 425-450, July.
    14. Desanctis, Gerardine & Jarvenpaa, Sirkka L., 1989. "Graphical presentation of accounting data for financial forecasting: An experimental investigation," Accounting, Organizations and Society, Elsevier, vol. 14(5-6), pages 509-525, October.
    15. Painton, Scott & Gentry, James W, 1985. " Another Look at the Impact of Information Presentation Format," Journal of Consumer Research, Oxford University Press, vol. 12(2), pages 240-244, September.
    16. Ganzach, Yoav, 1993. "Predictor Representation and Prediction Strategies," Organizational Behavior and Human Decision Processes, Elsevier, vol. 56(2), pages 190-212, November.
    17. Sprinkle, Geoffrey B., 2003. "Perspectives on experimental research in managerial accounting," Accounting, Organizations and Society, Elsevier, vol. 28(2-3), pages 287-318.
    18. Davis, Larry R., 1989. "Report format and the decision maker's task: An experimental investigation," Accounting, Organizations and Society, Elsevier, vol. 14(5-6), pages 495-508, October.
    19. repec:bla:joares:v:35:y:1997:i:1:p:97-113 is not listed on IDEAS
    20. Bonner, Sarah E., 1994. "A model of the effects of audit task complexity," Accounting, Organizations and Society, Elsevier, vol. 19(3), pages 213-234, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:ijoais:v:13:y:2012:i:1:p:41-59 is not listed on IDEAS
    2. repec:eee:joaced:v:30:y:2012:i:1:p:2-21 is not listed on IDEAS
    3. Hall, Matthew, 2010. "Accounting information and managerial work," LSE Research Online Documents on Economics 28539, London School of Economics and Political Science, LSE Library.
    4. Christian Hopp & Christian Lukas, 2014. "Evaluation frequency and evaluator’s experience: the case of venture capital investment firms and monitoring intensity in stage financing," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(2), pages 649-674, May.
    5. Christine Ohlert & Barbara Weißenberger, 2015. "Beating the base-rate fallacy: an experimental approach on the effectiveness of different information presentation formats," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 26(1), pages 51-80, April.
    6. Thomas, Tyler F., 2016. "Motivating revisions of management accounting systems: An examination of organizational goals and accounting feedback," Accounting, Organizations and Society, Elsevier, vol. 53(C), pages 1-16.
    7. repec:eee:ijoais:v:16:y:2015:i:c:p:1-22 is not listed on IDEAS
    8. repec:eee:advacc:v:30:y:2014:i:1:p:230-240 is not listed on IDEAS
    9. Qu, Sandy Q. & Cooper, David J., 2011. "The role of inscriptions in producing a balanced scorecard," Accounting, Organizations and Society, Elsevier, vol. 36(6), pages 344-362.
    10. repec:eee:joacli:v:31:y:2013:i:1:p:2-30 is not listed on IDEAS
    11. F. Douglas Foster & Juliana Ng & Marvin Wee, 2015. "Presentation Format and Financial Literacy: Accessibility and Assessability of Retirement Savings Statements," Journal of Consumer Affairs, Wiley Blackwell, vol. 49(3), pages 519-549, November.
    12. repec:eee:crpeac:v:34:y:2016:i:c:p:36-59 is not listed on IDEAS
    13. Marimo, Pricilla & Kaplan, Todd R & Mylne, Ken & Sharpe, Martin, 2012. "Communication of uncertainty in weather forecasts," MPRA Paper 38287, University Library of Munich, Germany.
    14. Hall, Matthew, 2010. "Accounting information and managerial work," Accounting, Organizations and Society, Elsevier, vol. 35(3), pages 301-315, April.
    15. repec:eee:advacc:v:30:y:2014:i:1:p:43-54 is not listed on IDEAS
    16. Fullerton, Rosemary R. & Kennedy, Frances A. & Widener, Sally K., 2013. "Management accounting and control practices in a lean manufacturing environment," Accounting, Organizations and Society, Elsevier, vol. 38(1), pages 50-71.
    17. Mouritsen, Jan & Kreiner, Kristian, 2016. "Accounting, decisions and promises," Accounting, Organizations and Society, Elsevier, vol. 49(C), pages 21-31.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:aosoci:v:33:y:2008:i:6:p:582-602. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/aos .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.