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The Use of Product Costs in Decision Making
John A. Brierley,
University of Sheffield
Christopher J. Cowton, University of Huddersfield
Colin Drury, University of Huddersfield
ABSTRACT. This paper applies grounded theory techniques to interviews conducted with management accountants in British manufacturing industry to assess the use of product costs in decision making. The results indicate that product costs are used generally often or all the time in decision making, and in many cases are used to set prices or to support the pricing decision. Operating units use product costs as attention directing information: (1) to highlight loss making products for further investigation and to identify any further information required, (2) because of the importance of non-financial information in decision making and (3) when product costs are not accurate enough to use in decision making. Operating units use product costs directly in decision making because they have confidence in the accuracy of the costs or because of ignorance of using the information as attention directing information.
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