The Impact of Activity‐Based Costing on Managerial Decisions at Insteel Industries—A Field Study

V.G. Narayanan and Ratna G. Sarkar

Journal of Economics & Management Strategy, 2002, vol. 11, issue 2, 257-288

Abstract: In this field‐based study, we interview top‐ and middle‐level managers at Insteel Industries and conduct statistical analysis of firm‐level data in order to shed light on whether activity‐based costing (ABC) provides new information to managers and whether activity‐based management (ABM) significantly influences product and customer‐related decisions. We find that after the ABC analysis, Insteel undertook a number of process improvements that resulted in significant cost savings. Additionally, Insteel displayed a higher propensity to discontinue or increase prices of products and discontinue customers that were found comparatively unprofitable in the ABC study. Thus we provide empirical evidence that ABC influences both strategic and operational managerial decisions.

Date: 2002
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