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Investigating the Claim of Superior Accuracy of Activity-Based Costing

出版	SSRN, 2020
URL	http://books.google.com.hk/books?id=err8zgEACAAJ&hl=&source=gbs_api

註釋Product costs are key indicators for product and capacity planning related decisions in firms. In this context, activity-based costing (ABC) is a well-known costing system which enjoys high interest in research and practice. Standard textbooks and ABC advocates constantly declared its comparative advantage over traditional volume-based product costing (TBC) in terms of accuracy and it is still evolving, e.g., currently in the form of time-driven activity-based costing. However, ABC has not fully diffused to practice and there is no clear empirical evidence that it drives firm performance. This paper investigates one possible explanation, i.e. that ABC does not have such a clear comparative advantage over TBC in terms of accuracy as claimed by literature and ABC advocates. A closer look at the literature shows, that there is currently no valid and comprehensive basis to actually support the presumed advantage of ABC in terms of accuracy beyond simple textbook examples. Using numerical experiments, this study performs a comparative assessment of ABC and TBC to disentangle the circumstances when there is actually an advantage for ABC in terms of accuracy. We show that ABC does not always outperform TBC when similar design choices, such as number of cost drivers, as well as characteristics of underlying production environments are considered. Furthermore, the results document that the heuristics of TBC do not suffer equally from complex product designs as suggested by the literature and ABC needs a high level of disaggregation to achieve its comparative advantage. Overall, TBC has been recognized to generally estimate product costs inaccurately, however, given the results from our study, the general superiority of ABC over TBC prove to be unfounded for many circumstances.