An empirical analysis of manufacturing overhead cost drivers

Rajiv D. Banker, Gordon Potter, Roger G. Schroeder

Research output: Contribution to journalArticlepeer-review

92 Scopus citations


Empirical validity of the claim that overhead costs are driven not by production volume but by transactions resulting from production complexity is examined using data from 32 manufacturing plants from the electronics, machinery, and automobile components industries. Transactions are measured using number of engineering change orders, number of purchasing and production planning personnel, shop-floor area per part, and number of quality control and improvement personnel. Results indicate a strong positive relation between manufacturing overhead costs and both manufacturing transactions and production volume. Most of the variation in overhead costs, however, is explained by measures of manufacturing transactions, not volume.

Original languageEnglish (US)
Pages (from-to)115-137
Number of pages23
JournalJournal of Accounting and Economics
Issue number1
StatePublished - Feb 1995


  • Cost drivers
  • Manufacturing overhead
  • Overhead costs
  • Production complexity
  • Transactions


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