Product Costing in the Presence of Endogenous Subcost Functions
Posted: 13 Aug 1997
We study a multiproduct setting in which the underlying technology permits identification of economic subcost functions. We then explore the ability of various accounting procedures to produce relatively accurate marginal cost estimates. This ability varies with the underlying technology, as well as among the products. Moreover, a portfolio perspective emerges; with errors varying among the products the issue of where in product space to tolerate relatively large costing errors in order to help ensure relatively small costing errors in other products arises.
JEL Classification: M40, M46
Suggested Citation: Suggested Citation