Driver costs in small firms: empirical analysis for farms
The agricultural sector has always been characterized by a predominance of small firms. International competition and the consequent need for restraining costs are permanent challenges for farms. This paper performs an empirical investigation of cost behavior in agriculture using panel data analysis. Our results show that transactions caused by complexity influence farm costs with opposite effects for specific and indirect costs. While transactions allow economies of scale in specific costs, they significantly increase indirect costs. However, the main driver for farm costs is volume. In addition, important differences exist for small and big farms, since transactional variables significantly influence the former but not the latter. While sophisticated management tools, such ABC, could provide only limited complementary useful information but no essential allocation bases for farms, they seem inappropriate for small farms.
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- Foster, George & Gupta, Mahendra, 1990. "Manufacturing overhead cost driver analysis," Journal of Accounting and Economics, Elsevier, vol. 12(1-3), pages 309-337, January.
- Schmitt, Gunther, 1991. "Why Is the Agriculture of Advanced Western Economies Still Organized by Family Farms? Will This Continue to Be So in the Future?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 18(3-4), pages 443-58.
- Josep Maria Argiles & Eric John Slof, 2001. "New opportunities for farm accounting," European Accounting Review, Taylor & Francis Journals, vol. 10(2), pages 361-383.
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