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FORMALIZING PRODUCT COST DISTORTION: The Impact of Volume-Related Allocation Bases on Cost Information

Gadjah Mada International Journal of Business (GamaIJB) · Vol. 5 No. 3 (2003) · pp. 381–400

DOI
10.22146/gamaijb.5630
ISSN
2338-7238, 1411-1128
Published
2003-09-12
Publisher
Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada
Language
eng

Abstract

The purpose o f this study is to formally analyze product cost distortions resulting from the process of allocating costs to products based on Activity-Based Costing (ABC) and the conventional product costing systems. The model developed in this paper rigorously shows the impact of treating costs that are not volume related as if they are. The model demonstrates that the source of product cost distortion is the difference between the proportion of driver used by each product in ABC and the proportion of the base used by the same product in the conventional costing systems. The difference arises because the conventional costing systems ignore the existence of batch-related and product-related costs. The model predicts a positive association between volume and size diversity with product cost distortions. When interaction between volume and size diversity exists, the distortion is either mitigated or exacerbated. The magnitude of the distortion is jointly determined by the size of the differences and the size of the total indirect costs.

Keywords

Collaboration network of the authors

4 authors · 4 co-authorship links · 3 across different organisations

Hover or tap a name to highlight its co-authors. Double-click to open the author's page.

  • University of Indonesia
  • Simon Fraser University
  • Politeknik Keuangan Negara STAN
  • Different organisations
  • Same organisation
  • Affiliation unknown
  • Thicker line = more joint articles · bigger circle = more articles
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Co-authorOrganisationJoint articles
Lindawati GaniUniversity of Indonesia3
Lianny LeoUniversity of Indonesia1
Anies Said BasalamahPoliteknik Keuangan Negara STAN1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) https://journal.ugm.ac.id/gamaijb/oai, first harvested 28 Okt 2026, last seen 28 Okt 2026.
Original metadata (oai_dc) 
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	<dc:title xml:lang="en-US">FORMALIZING PRODUCT COST DISTORTION: The Impact of Volume-Related Allocation Bases on Cost Information</dc:title>
	<dc:creator>Jermias, Johnny</dc:creator>
	<dc:subject xml:lang="en-US">activity-based costing; indirect costs; product cost distortions; size and volume diversity</dc:subject>
	<dc:description xml:lang="en-US">The purpose o f this study is to formally analyze product cost distortions resulting from the process of allocating costs to products based on Activity-Based Costing (ABC) and the conventional product costing systems. The model developed in this paper rigorously shows the impact of treating costs that are not volume related as if they are. The model demonstrates that the source of product cost distortion is the difference between the proportion of driver used by each product in ABC and the proportion of the base used by the same product in the conventional costing systems. The difference arises because the conventional costing systems ignore the existence of batch-related and product-related costs. The model predicts a positive association between volume and size diversity with product cost distortions. When interaction between volume and size diversity exists, the distortion is either mitigated or exacerbated. The magnitude of the distortion is jointly determined by the size of the differences and the size of the total indirect costs.</dc:description>
	<dc:publisher xml:lang="en-US">Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada</dc:publisher>
	<dc:date>2003-09-12</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
	<dc:type>info:eu-repo/semantics/publishedVersion</dc:type>
	<dc:type xml:lang="en-US">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.ugm.ac.id/gamaijb/article/view/5630</dc:identifier>
	<dc:identifier>10.22146/gamaijb.5630</dc:identifier>
	<dc:source xml:lang="en-US">Gadjah Mada International Journal of Business; Vol 5, No 3 (2003): September-December; 381-400</dc:source>
	<dc:source>2338-7238</dc:source>
	<dc:source>1411-1128</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.ugm.ac.id/gamaijb/article/view/5630/4603</dc:relation>
</oai_dc:dc>