Meyer, MatthiasMatthiasMeyerSchmidt, MarkMarkSchmidt2025-01-082025-01-082024-12-04Journal of Business Economics: e0290370 (2024-12-04)https://tore.tuhh.de/handle/11420/53027Accurately reported product costs are essential for many managerial decisions, such as product and resource planning, pricing, product mix decisions, and cost management. Balakrishnan et al. (Manag Sci 57(3):520–541, 2011) offered valuable managerial guidance on how costing system design heuristics affect the accuracy of reported product costs. This paper tests the internal and external validity of their numerical experiments and recommendations. Our replication results show that we are able to reproduce most of the findings, thereby confirming the results’ internal validity. To test external validity and assess the robustness of their findings, we modify a key model element by implementing a resource consumption pattern that follows a four-tier Activity-Based Costing (ABC) cost hierarchy, with which we repeat the numerical experiments. Although the design heuristics are mostly robust in this modified environment, the benefits of improving the costing system design are less straightforward and less linear. For instance, single plant-wide cost drivers outperform more information-demanding costing systems with few (2–4) cost pools. Consequently, given a four-tier ABC cost hierarchy, refining the costing system incrementally can reduce accuracy, leaving costing system designers stuck in the middle. Overall, our study supports Balakrishnan et al. (2011) results’ robustness but also identifies reasons why firms may still use simple costing systems.en1861-8928|||0044-23722024Springerhttps://creativecommons.org/licenses/by/4.0/ABC cost hierarchy | Costing system design | External validity | Internal validity | Model replication | Product costing | RobustnessSocial Sciences::330: EconomicsJournal Articlehttps://doi.org/10.15480/882.14266https://doi.org/10.15480/882.1426610.1007/s11573-024-01210-x10.15480/882.1426610.15480/882.14266Journal Article