Firm Size, Overhead Materiality and Product Cost Distortion in Manufacturing Firms

This study retests the inference drawn on product costing practices that size of firms and materiality of overhead are explanatory factors of product cost distortion. It identifies the industry of operation as a lurking variable and designs the study to control its impact. A Questionnaire is designed and circulated to factory accountants in three industries to collect information on sales value, product cost structure, and product costing practices. The extent of distortion is weighted based on product cost distortion theory in the literature. The conclusion drawn is that a production process that generates a large amount of overhead tends to propel industrial accountants to distort unit cost of production irrespective of the sophistication of the product costing system or the industry