IDEAS home Printed from https://ideas.repec.org/a/eee/bracre/v41y2009i4p208-226.html
   My bibliography  Save this article

The relationship between cost system complexity, purposes of use, and cost system effectiveness

Author

Listed:
  • Schoute, Martijn

Abstract

This paper uses survey data from 133 Dutch, medium-sized manufacturing firms to examine the associations between cost system complexity (in terms of the applied overhead absorption procedures), purposes of use, and cost system effectiveness. First, factor analysis identifies two underlying dimensions of cost system purposes of use, which refers to the range (scope) of purposes for which the cost system is used, among nine widely used purposes: cost system usage for product planning and cost management purposes. Next, the joint effect of cost system complexity and usage for product planning and cost management purposes on cost system effectiveness, as proxied by the intensity of use of and level of satisfaction with the cost system, is examined. The results robustly indicate that at higher (lower) levels of usage for product planning purposes, cost system complexity negatively (positively) affects cost system intensity of use, while at higher (lower) levels of usage for cost management purposes, cost system complexity positively (negatively) affects cost system intensity of use and satisfaction. This implies that when cost system design (i.e., its level of complexity) and its purposes of use are better aligned, the cost system is more effective.

Suggested Citation

  • Schoute, Martijn, 2009. "The relationship between cost system complexity, purposes of use, and cost system effectiveness," The British Accounting Review, Elsevier, vol. 41(4), pages 208-226.
    • Handle: RePEc:eee:bracre:v:41:y:2009:i:4:p:208-226
    DOI: 10.1016/j.bar.2009.10.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0890838909000602
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.bar.2009.10.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    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. Gosselin, Maurice, 1997. "The effect of strategy and organizational structure on the adoption and implementation of activity-based costing," Accounting, Organizations and Society, Elsevier, vol. 22(2), pages 105-122, February.
    2. Gordon, Lawrence A. & Narayanan, V. K., 1984. "Management accounting systems, perceived environmental uncertainty and organization structure: An empirical investigation," Accounting, Organizations and Society, Elsevier, vol. 9(1), pages 33-47, January.
    3. Pizzini, Mina J., 2006. "The relation between cost-system design, managers' evaluations of the relevance and usefulness of cost data, and financial performance: an empirical study of US hospitals," Accounting, Organizations and Society, Elsevier, vol. 31(2), pages 179-210, February.
    4. Gerdin, Jonas & Greve, Jan, 2008. "The appropriateness of statistical methods for testing contingency hypotheses in management accounting research," Accounting, Organizations and Society, Elsevier, vol. 33(7-8), pages 995-1009.
    5. Christopher D. Ittner & William N. Lanen & David F. Larcker, 2002. "The Association Between Activity‐Based Costing and Manufacturing Performance," Journal of Accounting Research, Wiley Blackwell, vol. 40(3), pages 711-726, June.
    6. Govindarajan, V., 1984. "Appropriateness of accounting data in performance evaluation: An empirical examination of environmental uncertainty as an intervening variable," Accounting, Organizations and Society, Elsevier, vol. 9(2), pages 125-135, June.
    7. Drury, Colin & Tayles, Mike, 2005. "Explicating the design of overhead absorption procedures in UK organizations," The British Accounting Review, Elsevier, vol. 37(1), pages 47-84.
    8. William H. DeLone & Ephraim R. McLean, 1992. "Information Systems Success: The Quest for the Dependent Variable," Information Systems Research, INFORMS, vol. 3(1), pages 60-95, March.
    9. Bisbe, Josep & Batista-Foguet, Joan-Manuel & Chenhall, Robert, 2007. "Defining management accounting constructs: A methodological note on the risks of conceptual misspecification," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 789-820.
    10. Hartmann, Frank G. H. & Moers, Frank, 2003. "Testing contingency hypotheses in budgetary research using moderated regression analysis: a second look," Accounting, Organizations and Society, Elsevier, vol. 28(7-8), pages 803-809.
    11. Jarvis, Cheryl Burke & MacKenzie, Scott B & Podsakoff, Philip M, 2003. "A Critical Review of Construct Indicators and Measurement Model Misspecification in Marketing and Consumer Research," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 30(2), pages 199-218, September.
    12. Eli Segev, 1989. "A systematic comparative analysis and synthesis of two business‐level strategic typologies," Strategic Management Journal, Wiley Blackwell, vol. 10(5), pages 487-505, September.
    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. Schoute, Martijn, 2011. "The relationship between product diversity, usage of advanced manufacturing technologies and activity-based costing adoption," The British Accounting Review, Elsevier, vol. 43(2), pages 120-134.
    2. Zhanna Chupina & Alexander Chursin & Andrew Boginsky & Ivan Kvasov, 2023. "Sustainable Economic Development of Enterprises: A Methodology Based on the Toolkit," Sustainability, MDPI, vol. 15(17), pages 1-15, August.
    3. Hadid, Wael & Hamdan, Mohammed, 2022. "Firm size and cost system sophistication: The role of firm age," The British Accounting Review, Elsevier, vol. 54(2).
    4. Henri, Jean-François & Boiral, Olivier & Roy, Marie-Josée, 2016. "Strategic cost management and performance: The case of environmental costs," The British Accounting Review, Elsevier, vol. 48(2), pages 269-282.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schoute, Martijn, 2011. "The relationship between product diversity, usage of advanced manufacturing technologies and activity-based costing adoption," The British Accounting Review, Elsevier, vol. 43(2), pages 120-134.
    2. Simon Alcouffe & Jonathan Maurice & Nadine Galy & Loïc Gate, 2019. "Is the limited diffusion of management accounting innovations really a paradox? A meta-analysis of the relationship between product diversity and the adoption of Activity-Based Costing [La faible d," Post-Print hal-02124677, HAL.
    3. Bedford, David S. & Malmi, Teemu & Sandelin, Mikko, 2016. "Management control effectiveness and strategy: An empirical analysis of packages and systems," Accounting, Organizations and Society, Elsevier, vol. 51(C), pages 12-28.
    4. Al-Sayed, Mahmoud & Dugdale, David, 2016. "Activity-based innovations in the UK manufacturing sector: Extent, adoption process patterns and contingency factors," The British Accounting Review, Elsevier, vol. 48(1), pages 38-58.
    5. Simon Alcouffe & Pierre Mévellec, 2012. "Analyse de la littérature sur l'ABC et proposition d'une taxinomie," Post-Print hal-00936600, HAL.
    6. Christian Nitzl & Wynne W. Chin, 2017. "The case of partial least squares (PLS) path modeling in managerial accounting research," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 28(2), pages 137-156, May.
    7. Soon-Yau Foong & Neilson Anak Teruki, 2009. "Cost-system functionality and the performance of the Malaysian palm oil industry," Asian Review of Accounting, Emerald Group Publishing, vol. 17(3), pages 212-225, September.
    8. Alexander Himme, 2012. "Critical success factors of strategic cost reduction," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 23(3), pages 183-210, December.
    9. Nitzl, Christian, 2016. "The use of partial least squares structural equation modelling (PLS-SEM) in management accounting research: Directions for future theory development," Journal of Accounting Literature, Elsevier, vol. 37(C), pages 19-35.
    10. Utz Schäffer & Michael Zyder, 2007. "Eine Analyse des moderierenden Einflusses der Faktoren Wettbewerbsintensität, Marktdynamik und dezentrale Autonomie auf die erfolgreiche Gestaltung der Budgetierung," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 18(1), pages 7-33, April.
    11. Hadid, Wael & Hamdan, Mohammed, 2022. "Firm size and cost system sophistication: The role of firm age," The British Accounting Review, Elsevier, vol. 54(2).
    12. Ellen Haustein & Robert Luther & Peter Schuster, 2014. "Management control systems in innovation companies: a literature based framework," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(4), pages 343-382, February.
    13. Luft, Joan & Shields, Michael D., 2003. "Mapping management accounting: graphics and guidelines for theory-consistent empirical research," Accounting, Organizations and Society, Elsevier, vol. 28(2-3), pages 169-249.
    14. Grafton, Jennifer & Lillis, Anne M. & Widener, Sally K., 2010. "The role of performance measurement and evaluation in building organizational capabilities and performance," Accounting, Organizations and Society, Elsevier, vol. 35(7), pages 689-706, October.
    15. Maurice Gosselin, 2000. "Influence de la stratégie sur l'adoption et la mise en oeuvre d'une comptabilité par activités," Revue Finance Contrôle Stratégie, revues.org, vol. 3(4), pages 37-56, December.
    16. Granlund, Markus & Lukka, Kari, 2017. "Investigating highly established research paradigms: Reviving contextuality in contingency theory based management accounting research," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 45(C), pages 63-80.
    17. Chenhall, Robert H., 2003. "Management control systems design within its organizational context: findings from contingency-based research and directions for the future," Accounting, Organizations and Society, Elsevier, vol. 28(2-3), pages 127-168.
    18. Hoque, Zahirul, 2004. "A contingency model of the association between strategy, environmental uncertainty and performance measurement: impact on organizational performance," International Business Review, Elsevier, vol. 13(4), pages 485-502, August.
    19. Klaus Derfuss, 2015. "Relating Context Variables to Participative Budgeting and Evaluative Use of Performance Measures: A Meta-analysis," Abacus, Accounting Foundation, University of Sydney, vol. 51(2), pages 238-278, June.
    20. Annukka Jokipii, 2010. "Determinants and consequences of internal control in firms: a contingency theory based analysis," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 14(2), pages 115-144, May.

    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:bracre:v:41:y:2009:i:4:p:208-226. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/the-british-accounting-review .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.