Activity-based costing for economic value added®

Regina M. Anctil, James Schuyler Jordan, Arujt Mukherji

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

Economic value added, which is the currently popular term for the traditional accounting concept of residual income (RI), subtracts from operating income an interest charge for invested capital. This paper provides an activity-based cost system that supports RI maximization. We construct a model of participative budgeting for a multi-activity firm in which the cost system allocates plant and equipment cost to products using a formula that includes the interest charge. The budget system we design enables decision makers to identify RI-improving opportunities for outsourcing and dropping unprofitable products. The budget system also has the "open-architecture" property that additional informal communication among activity managers can only serve to increase RI.

Original languageEnglish (US)
Pages (from-to)231-264
Number of pages34
JournalReview of Accounting Studies
Volume2
Issue number3
DOIs
StatePublished - Jan 1 1998

Fingerprint

Economic value added
Residual income
Activity-based costing
Costs
Charge
Communication
Decision maker
Income
Outsourcing
Participative budgeting
Managers
Activity based costs
System design

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)

Cite this

Anctil, Regina M. ; Jordan, James Schuyler ; Mukherji, Arujt. / Activity-based costing for economic value added®. In: Review of Accounting Studies. 1998 ; Vol. 2, No. 3. pp. 231-264.
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Activity-based costing for economic value added®. / Anctil, Regina M.; Jordan, James Schuyler; Mukherji, Arujt.

In: Review of Accounting Studies, Vol. 2, No. 3, 01.01.1998, p. 231-264.

Research output: Contribution to journalArticle

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