Management Review

›› 2016, Vol. 28 ›› Issue (12): 235-243.

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Measurement Error Analysis for Activity-based Costing with New Orders under the Consideration of Resource Consumption Pattern

Wu Xiaodan1, Li Juan1, Liu Dan1, Yue Dianmin1, Chao-Hsien Chu2   

  1. 1. School of Economics and Management, Hebei University of Technology, Tianjin 300130;
    2. University Park, the Pennsylvania State University, PA 16801
  • Received:2015-10-23 Online:2016-12-28 Published:2017-03-15

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Abstract:

Undoubtedly, new orders bring new operations and affect resource consumption which leads to cost reassignment in activitybased costing system. On that condition, the cost model is refined and total cost error model is proposed by analyzing the two resource consumption distributions of cost pool, the proportion distribution of resource and three measurement errors on the basis of resource sharing. With the analysis of measurement error model, we obtain the correlation between robustness of measurement errors in activity-based cost system and resource consumption pattern. Finally, we find that the robustness of cost system grows better as the proportion of resource utilization decreases and the robustness may not get worse as the difference of resource cost pools' size increases. This provides a basis for how to (1) eliminate measurement errors under diversity, (2) schedule limited resources and (3) raise cost accuracy.

Key words: cost system design, activity cost, resource consumption, measurement error