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Review of Marketing Research
Type: Book
ISBN: 978-0-85724-726-1

Book part
Publication date: 1 January 2008

Sebastiaan Morssinkhof, Marc Wouters and Luk Warlop

This article addresses purchasing decisions and the use of total cost of ownership (TCO) information. TCO is based on a monetary quantification of nonfinancial attributes and…

Abstract

This article addresses purchasing decisions and the use of total cost of ownership (TCO) information. TCO is based on a monetary quantification of nonfinancial attributes and aggregation into a summary measure (such as cost per hour, per wafer, or per kilometer). From an accounting point-of-view, one intricate issue is the accuracy of the monetary quantification and how this affects decision-making. We distinguish three different kinds of inaccurate monetary quantification, and we investigate the weight that decision makers attach to attributes that are inaccurately monetarily quantified and subsequently included in TCO information. Specifically, we investigate whether this weight depends on reflective thinking and experience. This question is relevant beyond TCO, for all decision-making situations that involve monetary quantification of attributes and subsequent aggregation, such as in activity-based costing, net present value calculations for capital budgeting decisions, or cost-benefit analyses in public administration.

We found support for the hypothesis that reflective thinking increases the weight decision makers attach to the attribute that is included as a minimum cost in the TCO-numbers, but not for the hypothesis that reflective thinking would reduce the weight attached to the attribute that is included as a maximum cost in the TCO-numbers. Students and practitioners differed significantly in the weight they attached to an attribute that was excluded from the TCO-numbers, and practitioners gave less weight to such attributes. Together these results suggest that TCO-numbers should be provided with care and possible inaccuracies should be clarified.

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Advances in Management Accounting
Type: Book
ISBN: 978-1-84855-267-8

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Review of Marketing Research
Type: Book
ISBN: 978-0-7656-1306-6

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Book part
Publication date: 1 January 2008

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Advances in Management Accounting
Type: Book
ISBN: 978-1-84855-267-8

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Leading with Presence: Fundamental Tools and Insights for Impactful, Engaging Leadership
Type: Book
ISBN: 978-1-78714-599-3

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Review of Marketing Research
Type: Book
ISBN: 978-0-85724-727-8

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