The academic and practitioner literature justifies firms' use of product costs in product pricing and capacity planning decisions as heuristics to address an otherwise intractable problem. However, product costs are the output of a cost reporting system, which itself is the outcome of heuristic...

We examine how the demand for inter-departmental coordination changes as the firm increases the sophistication of its accounting system. In our model, a production department performs cost reduction and manufactures the product, while a marketing department sets prices and sells the final...