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

32 Pages Posted: 11 Jan 2017

See all articles by V.G. Narayanan

V.G. Narayanan

Harvard University - Business School (HBS)

Ratna G. Sarkar

Harvard University - General Management Unit

Date Written: Summer 2002

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

Narayanan, V.G. and Sarkar, Ratna G., The Impact of Activity‐Based Costing on Managerial Decisions at Insteel Industries—A Field Study (Summer 2002). Journal of Economics & Management Strategy, Vol. 11, Issue 2, pp. 257-288, 2002, Available at SSRN: https://ssrn.com/abstract=2897210 or http://dx.doi.org/10.1111/j.1430-9134.2002.00257.x

V.G. Narayanan (Contact Author)

Harvard University - Business School (HBS)

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ratna G. Sarkar

Harvard University - General Management Unit ( email )

Cambridge, MA
United States
617-495-6408 (Phone)
617-496-7363 (Fax)

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