Value Chain Cost Tracing And Cost System Obsolescence: An Exploratory Study Of Small To Medium-Sized Companies

Abstract

To succeed in todays competitive business environment, corporations need to undertake value chain analysis and select an optimal mix of value chain activities. Based on the data collected from 73 small- to medium-sized companies, this study provides evidence regarding current practices in value chain cost tracing and cost system obsolescence. The research findings indicate that companies do a better job of linking value chain costs to products/product lines than to customers/customer classes. Overall, however, the proportion of each value chain cost attributed to either cost object tends to be low. This indicates that firms management may be rather slow in adopting new management tools. Furthermore, most companies are still using value-based cost allocations, which suggests cost system obsolescence. Implications of this study and future research directions are also discussed.