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The Association Between Activity‐Based Costing and Manufacturing Performance
Author(s) -
Ittner Christopher D.,
Lanen William N.,
Larcker David F.
Publication year - 2002
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/1475-679x.00068
Subject(s) - profitability index , activity based costing , association (psychology) , sample (material) , quality (philosophy) , operations management , business , return on assets , accounting , engineering , finance , psychology , chemistry , philosophy , chromatography , epistemology , psychotherapist
This study examines the association between activity‐based costing and manufacturing performance. Results using a cross‐sectional sample of manufacturing plants indicates that extensive ABC use is associated with higher quality levels and greater improvements in cycle time and quality, and is indirectly associated with manufacturing cost reductions through quality and cycle time improvements. However, on average, extensive ABC use has no significant association with return on assets. Instead, we find weak evidence that the association between ABC and accounting profitability is contingent on the plant’s operational characteristics.