This paper reports evidence on how managers' cost knowledge affects their cost‐based judgment performance when a volume‐based cost accounting system is used and products have diverse resource consumption. The evidence indicates that managers who have activity‐based costing (ABC) knowledge content and/or an activity knowledge structure debias the cost information to have relatively good judgment performance. In contrast, managers with only cost‐accounting knowledge content have relatively poor judgment performance. The judgment performance model (Libby and Luft 1993) provides the theoretical framework for this paper. Implications of this paper for future research are discussed.

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