An examination of the factors influencing the inclusion of non-manufacturing overhead costs in product costs

Abstract

Biographical notes: John Brierley is a Senior Lecturer in Accounting and Finance at the University of Sheffield Management School. His research interest is in the calculation of products costs and their use in decision-making. 2An examination of the factors influencing the inclusion of non-manufacturing overhead costs in product costs Abstract: Research has not examined the factors influencing the inclusion of nonmanufacturing overhead costs in product costs. This paper addresses this deficiency by using the results of questionnaires completed by British management accountants in manufacturing industry to test a logistic regression model of the factors influencing whether or not non-manufacturing overhead costs are included in product costs that are used in decision making. The only significant effect in the logistic regression analysis was for the percentage of non-manufacturing overhead costs to either total costs or total overhead costs, but the result was not in the direction expected.Specifically the smaller the non-manufacturing overhead percentage the more likely were operating units to include non-manufacturing overhead costs in product costs. In addition, there were non-significant effects for the level of competition, product customisation, the influence of financial reporting requirements over product costing and operating unit size, when measured by annual sales revenue or number of employees.

Do customer profitability analyses pay? A survey of large Norwegian companies

“…Studies may also include cost assignments. However, the assignments of costs are not straightforward (Atkinson et al, 2012;Horngren et al, 2012;Brierley, 2013Brierley, , 2015Kraus et al, 2015;Datar and Rajan, 2018). Costs may be estimated by different costing methods: 1 full costing 2 variable costing 3 ABC 4 TDABC.…”

The Determinants of Adding Non-Production Costs When Calculating Product Costs: Evidence from the Saudi Industrial Sector

“…However, operating units are inconsistent regarding the addition of non-production costs when calculating product costs for decision making use because most of these costs are not a clear component of product costs and are not allowed to be part of product costs calculated for financial reporting purposes (Brierley, 2017; Asian Economic and Financial Review 1994; Lamminmaki & Drury, 2001). This raises the question of what affects the addition of non-production costs when calculating product costs for decision making use.…”

“…This raises the question of what affects the addition of non-production costs when calculating product costs for decision making use. To the author's knowledge, only two studies have partially focused on the determinants of adding non-production costs when calculating product costs for decision making use (Brierley, 2015;Brierley, 2017). Despite the contributions of these studies, three research gaps remain.…”

“…The first research gap is the lack of focus on total non-production costs. The prior literature focused only on the indirect component of non-production costs (Brierley, 2015;Brierley, 2017). Including both direct and indirect non-production costs is important as each represents a considerable aspect of non-production costs and is related to the accuracy of product costs, and is therefore necessary to clearly understand the determinants of adding nonproduction costs when calculating product costs for decision making use (Drury & Tayles, 1994;Johnson & Loewe, 1987;Kaplan, 1988).…”

“…The third research gap is the lack of investigation into the link between cost system complexity (CSC) and the addition of non-production costs when calculating product costs for decision making use. This is surprising, given that the level of CSC reflects the level of complexity of the business and production environments, which affect the level of detail of the cost data and, therefore, the consideration of both production and non-production costs (Brierley, 2015).…”