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Costing Rule and Cost Behavior in the Korean Defense Industry

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Authors
Yong, Hongjung; Ahn, Taesik; Jung, Hyungrok; Park, Jinha
Issue Date
2015-06
Publisher
College of Business Administration, Seoul National University
Citation
Seoul Journal of Business, Vol.21 No.1, pp. 31-58
Keywords
cost stickinesslabor costsdefense industrycommercial sectordefense sector
Abstract
This paper investigates the cost behavior in the Korean defense industry. Managers in the defense industry tend to have motivation to manage earnings because the costs incurring in the production process of defense articles are reimbursed based on cost plus contracts. Results are as follows. First, in the sample of the defense sector, SG&A costs and total manufacturing costs exhibited anti-stickiness whereas labor costs exhibited cost stickiness. Other cost components displayed symmetric cost behavior, Next, in the commercial sector, materials costs, direct material costs, total manufacturing costs, cost of goods sold, and total costs exhibited anti-stickiness. Labor costs showed cost stickiness whereas SG&A costs, overhead costs, and indirect production costs had symmetric cost behavior. Overall, the results reveals that the change rate of labor costs of the defense sector exhibits more cost stickiness to changes in sales than the commercial sector.
ISSN
1226-9816
Language
English
URI
http://hdl.handle.net/10371/95352
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College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of BusinessSeoul Journal of Business Volume 21, Number 1/2 (2015)
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