Using data from hospitals in the state of Washington, we examine the time-series behavior of overhead costs. We find that more accurate predictions of changes in costs are usually generated by assuming a cost will not change at all (except for inflation) than by assuming that the cost will...

This paper demonstrates that for a multi-product firm with fixed costs, full-cost markup rules impose a constraint on the relationship among product prices that may prevent the firm from achieving satisfactory profits even when satisfactory profits are feasible. For any given cost structure and...

Most large manufacturing companies report setting prices by marking up some version of full cost. The rationale is that full cost pricing provides a quot;satisfactory profit.quot; This paper shows that a full cost markup rule imposes a constraint which may prevent the company from achieving...

Costing systems including activity-based costing generate average cost data. When these average costs are used for decision-making it is implicitly assumed that they approximate marginal costs. (In other words it is assumed every cost is strictly proportional to activity they are entirely...

Manufacturing firms can manipulate income by producing in excess of the quantity needed to meet current period demand, thereby allocating part of current period fixed manufacturing overhead costs from cost of goods sold to inventory. Since it is subject to manipulation, the component of earnings...