Activity Based Costing And Operational Decision Making: A Relevance Determination Analysis


Ogoun Stanley
Ihenye Joel


This current study sought to determine the operational decision usefulness of the activity-based costing information system paradigm. This was against the background of the submission by some studies that an ABC information system is entirely irrelevant for short term decision making. The study applied the inferential statistical tools of effect size and estimated omega squared to test data obtained for this purpose, from a sample size of eighty-two firms listed on the floor of the Nigerian Stock Exchange (NSE). It was observed that ABC information input into operational decision making significantly affects the work-in-progress inventory and finished goods inventory values. But it has a very weak bearing on cycle time and number of jobs in the shop as measurable outputs of operational decision making Thus, the study inferred that the ABC information framework is not completely irrelevant for operational decision making. It can generate information to support short term decisions in some instances, given that the long term is nothing other than an aggregation of short terms. Hence, short term decision makers should endeavour to draw from all information bases available to support a system-based approach to decision making. This way the overall impact of operational short term decisions are better weighed.