Assessing the Costs and Benefits of Investing in Cost System Accuracy

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Abstract

This article presents a flowchart to help managers determine whether the benefits of implementing a multiple-cost-driver system to improve the accuracy of reported unit costs will outweigh the implementa-tion costs. The flowchart disciplines decision makers to consider whether the firm produces multiple products, whether those products consume indirect resources in heterogeneous patterns, and whether the firm's competitive position truly depends on more accurately reported cost information. Careful use of this tool will increase the likelihood that investments in cost system accuracy will have positive net present values. © 2013 Wiley Periodicals, Inc.

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