Search:
Computing and Library Services - delivering an inspiring information environment

An empirical investigation of the importance of cost-plus pricing

Guilding, Chris, Drury, Colin and Tayles, Mike (2005) An empirical investigation of the importance of cost-plus pricing. Managerial Auditing Journal, 20 (2). pp. 125-137. ISSN 0268-6902

[img] PDF
Restricted to Registered users only

Download (86kB)

    Abstract

    Purpose – This paper has two specific objectives: to appraise the relative importance of cost-plus
    pricing and to develop and test hypotheses concerned with contingent factors that might affect the
    degree of importance attached to cost-plus pricing.
    Design/methodology/approach – Data were collected via a mailed survey of UK and Australian
    companies. Tests were applied and non-response bias was not a threat to the validity of the findings.
    Findings – A relatively high degree of importance attached to cost-plus pricing is noted, although
    there appears to be a substantial number of companies that use cost-plus pricing for a relatively small
    sub-set of products and services. Companies confronted by high competition intensity attach relatively
    high degrees of importance to cost-plus pricing and manufacturing companies attach a relatively low
    degree of importance to cost-plus pricing.
    Originality/value – The paper makes a contribution, given that only two empirical studies with a
    specific focus on cost-plus pricing were revealed in a literature search covering the last two decades.
    Additionally, little has been done to investigate the contingent factors affecting the application of
    cost-plus pricing. The significant role played by competition intensity in connection with accounting
    system design is observed to be one of the more enduring relationships uncovered by management
    accounting research. But a somewhat perplexing aspect of this study concerns the failure to find a
    statistically significant positive relationship between company size and cost-plus pricing.

    Item Type: Article
    Additional Information: © Emerald Group Publishing Limited
    Uncontrolled Keywords: Cost-plus pricing, Costs, Competitive strategy, Manufacturing systems
    Subjects: H Social Sciences > HF Commerce
    H Social Sciences > H Social Sciences (General)
    H Social Sciences > HF Commerce > HF5601 Accounting
    Schools: The Business School
    References:

    Armitage, H.M. and Nicholson, R. (1993), “Activity-based costing: a survey of Canadian
    practice”, No. 3, Society of Management Accountants of Canada, Vancouver.
    Ask, U. and Ax, C. (1992), “Trends in the development of product costing practices and
    techniques – a survey of Swedish manufacturing industry”, paper presented at the 15th
    Annual Congress of the European Accounting Association, Madrid, 22-24 April.
    Bhimani, A. (1996), Management Accounting European Perspectives, Oxford University Press,
    Oxford.
    Bjornenak, T. (1997a), “Diffusion and accounting: the case of ABC in Norway”, Management
    Accounting Research, Vol. 8 No. 1, pp. 3-17.
    Bjornenak, T. (1997b), “Conventional wisdom and accounting practices”, Management
    Accounting Research, Vol. 8 No. 4, pp. 367-82.
    Brierley, J.A., Cowton, C.J. and Drury, C. (2001), “Research into product costing practice:
    a European perspective”, The European Accounting Review, Vol. 10 No. 2, pp. 215-56.
    Bright, J., Davies, R.E., Downes, C.A. and Sweeting, R.C. (1992), “The deployment of costing
    techniques and practices: a UK study”, Management Accounting Research, Vol. 3 No. 3,
    pp. 201-11.
    Bromwich, M. (1990), “The case for strategic management accounting: the role of accounting
    information for strategy in competitive markets”, Accounting, Organizations and Society,
    Vol. 15 No. 1/2, pp. 27-45.
    Bruns, W.J. Jr and Waterhouse, J.H. (1975), “Budgetary control and organization structure”,
    Journal of Accounting Research, Vol. 13, Autumn, pp. 177-203.
    Chenhall, R.H. and Langfield-Smith, K. (1998), “Adoption and benefits of management
    accounting practices: an Australian perspective”, Management Accounting Research, Vol. 9
    No. 1, pp. 1-20.
    Chenhall, R.H. and Morris, D. (1986), “The impact of structure, environment, and interdependence
    on the perceived usefulness of management accounting systems”, The Accounting Review,
    Vol. 61 No. 1, pp. 16-35.
    Chenhall, R.H. and Morris, D. (1993), “The role of post completion audits, managerial learning,
    environmental uncertainty and performance”, Behavioral Research in Accounting, Vol. 5,
    pp. 170-86.
    Coate, M.B. and McChesney, F.S. (1992), “Empirical evidence on FTC enforcement of the merger
    guidelines”, Economic Inquiry, Vol. 30 No. 2, pp. 277-93.
    Cooper, R. (1990), “Explicating the logic of ABC”, Management Accounting, Vol. 68 No. 9,
    pp. 58-60.
    Dean, G.W., Joye, M.P. and Blayney, P.J. (1991), “Strategic management accounting survey”,
    Monograph No. 8, University of Sydney, Sydney.
    Drury, C. (2000), Management and Cost Accounting, Thomson Learning Business Press, London.
    Drury, C. and Tayles, M. (2000), Cost System Design and Profitability Analysis in UK Companies,
    Chartered Institute of Management Accountants, London.
    Drury, C., Braund, S., Osborne, P. and Tayles, M. (1993), A Survey of Management Accounting
    Practices in UK Manufacturing Companies, Chartered Association of Certified
    Accountants, London.
    Emore, J.R. and Ness, J.A. (1991), “The slow pace of meaningful changes in cost systems”, Journal
    of Cost Management for the Manufacturing Industry, Winter, pp. 36-45.Farrell, J. and Shapiro, C. (1990), “Horizontal mergers: an equilibrium analysis”, American
    Economic Review, Vol. 80 No. 1, pp. 107-26.
    Gordon, L.A. and Miller, D. (1976), “A contingency framework for the design of accounting
    information systems”, Accounting, Organizations and Society, Vol. 1 No. 1, pp. 59-69.
    Govindarajan, V. (1984), “Appropriateness of accounting data in performance evaluation: an
    empirical examination of environmental uncertainty as an intervening variable”,
    Accounting, Organizations and Society, Vol. 9 No. 2, pp. 125-36.
    Govindarajan, V. and Anthony, R.N. (1983), “How firms use cost data in price decisions”,
    Management Accounting (USA), July, pp. 30-6.
    Green, F.B. and Amenkhienan, F.E. (1992), “Accounting innovations: a cross sectional survey of
    manufacturing firms”, Journal of Cost Management for the Manufacturing Industry, Vol. 6
    No. 1, pp. 58-64.
    Guilding, C. (1999), “Competitor-focussed accounting: an exploratory study”, Accounting
    Organizations and Society, Vol. 24 No. 7, pp. 583-95.
    Guilding, C. and McManus, L. (2002), “The incidence, perceived merit and antecedents of
    customer accounting: an exploratory note”, Accounting, Organizations and Society, Vol. 27
    No. 1-2, pp. 45-59.
    Gul, F. and Chia, Y.M. (1994), “The effects of management accounting systems, perceived
    environmental uncertainty and decentralization on managerial performance: a test of
    three-way interaction”, Accounting, Organizations and Society, Vol. 19 No. 4, pp. 413-26.
    Horngren, C., Foster, G. and Datar, S. (2000), Cost Accounting: A Managerial Emphasis, 10th ed.,
    Prentice Hall, Englewood Cliffs, NJ.
    Innes, J. and Mitchell, F. (1991), “ABC: a survey of CIMA members”, Management Accounting,
    Vol. 69 No. 9, pp. 28-30.
    Innes, J. and Mitchell, F. (1995), “A survey of activity-based costing in the UK’s largest
    companies”, Management Accounting Research, Vol. 6 No. 6, pp. 137-54.
    Innes, J., Mitchell, F. and Sinclair, D. (2000), “Activity-based costing in the UK’s largest
    companies: a comparison of 1994 and 1999 survey results”, Management Accounting
    Research, Vol. 11 No. 3, pp. 349-62.
    Johnson, H.T. and Kaplan, R. (1987), Relevance Lost: The Rise and Fall of Management
    Accounting, Harvard Business School Press, Boston, MA.
    Joshi, P.L. (1998), “An explanatory study of activity-based costing practices and benefits in large
    size manufacturing companies in India”, Accounting and Business Review, Vol. 5, pp. 65-93.
    Joye, M.P. and Blayney, P.J. (1990), “Cost and management accounting practice in Australian
    manufacturing companies: survey results”, Monograph No. 7, University of Sydney,
    Sydney.
    Kaplan, R. (1984), “Yesterday’s accounting undermines production”, Harvard Business Review,
    Vol. 62 No. 7, pp. 95-101.
    Kaplan, R. (1990), “Contribution margin analysis: no longer relevant”, Journal of Management
    Accounting Research, Vol. 5 No. 2, pp. 2-15.
    Khandwalla, P. (1972), “The effects of different types of competition on the use of management
    control”, Journal of Accounting Research, Autumn, pp. 275-85.
    Kohli, A. and Jaworski, B. (1990), “Market orientation: the construct, research propositions, and
    managerial implications”, Journal of Marketing, Vol. 54 No. 2, pp. 1-18.Lamminmaki, D. and Drury, C. (2001), “A comparison of New Zealand and British
    product-costing practices”, The International Journal of Accounting, Vol. 36 No. 3,
    pp. 329-47.
    Langfield-Smith, K., Thorne, H. and Hilton, R. (1998), Management Accounting: An Australian
    Perspective, 2nd ed., McGraw-Hill, London.
    Libby, T. and Waterhouse, J.H. (1996), “Predicting change in management accounting systems”,
    Journal of Management Accounting Research, Vol. 8, pp. 137-50.
    Lukka, K. and Granlund, M. (1996), “Cost accounting in finland: current practice and trends of
    development”, The European Accounting Review, Vol. 5 No. 1, pp. 1-28.
    Merchant, K.A. (1981), “The design of the corporate budgeting system: influences on managerial
    behavioural and performance”, The Accounting Review, Vol. 56 No. 4, pp. 813-29.
    Merchant, K.A. (1984), “Influences on departmental budgeting: an empirical examination of a
    contingency model”, Accounting, Organizations and Society, Vol. 9 No. 3/4, pp. 291-310.
    Mills, R.W. (1988), “Pricing decisions in UK manufacturing and service companies”,
    Management Accounting (UK), November, pp. 38-9.
    Simons, R. (1990), “The role of management control systems in creating competitive advantage:
    new perspectives”, Accounting, Organizations and Society, Vol. 15 No. 1/2, pp. 127-43.
    Tymon, W.G., Stout, D.E. and Shaw, K.N. (1998), “Critical analysis and recommendations
    regarding the role of perceived environmental uncertainty in behavioral accounting
    research”, Behavioral Research in Accounting, Vol. 10, pp. 23-46.
    Werden, G.J. (1991), “Horizontal mergers: comment”, American Economic Review, Vol. 81 No. 4,
    pp. 1002-6.

    Depositing User: Sara Taylor
    Date Deposited: 30 Jul 2007
    Last Modified: 28 Jul 2010 19:20
    URI: http://eprints.hud.ac.uk/id/eprint/327

    Document Downloads

    Downloader Countries

    More statistics for this item...

    Item control for Repository Staff only:

    View Item

    University of Huddersfield, Queensgate, Huddersfield, HD1 3DH Copyright and Disclaimer All rights reserved ©