Although employees' time estimates are used extensively for costing purposes, they are prone to measurement error. In an experimental setting, we research how measurement error in time estimates varies with: (1) the level of aggregation in the definition of costing system activities (aggregated or disaggregated); (2) task coherence (the extent to which the activities that require time estimates present themselves coherently or incoherently); and (3) when notice is given that time estimates will be required (in advance or after the fact), that is, whether participants know that time estimates will be required before they perform the activities. We also test on response mode (estimates in percentages or absolute time units). The results suggest an important trade-off between the level of aggregation and measurement error: increasing aggregation in the definition of activities leads to lower measurement error. Also, advance notification reduces measurement error, especially in settings with aggregated activities or incoherent tasks. Finally, we find a strong overestimation bias when participants provide time estimates in minutes, which may be problematic for Time-Driven Activity-Based Costing that advocates the use of estimates in minutes. These results are relevant to accountants and decision makers who want to assess and control the measurement error in their costing system and to professionals in related areas that make use of time estimates (e.g., billing, tendering).

We examine the effect of more precise cost information on contract renegotiations between supply-chain parties. Specifically, we experimentally investigate the benefits of activity-based costing (ABC) information to address common supply-chain inefficiencies that are caused by the buyer or the seller, but have the same underlying costs. Results suggest that the impact of more precise cost information depends crucially on the cause of the inefficiency that parties need to address during the negotiation. ABC information increases the total joint profit in the supply chain. However, ABC information increases the seller's perceptions of the fairness of the buyer's arguments for contract changes only when the buyer causes the inefficiency but not when the seller causes the inefficiency. The combined effect of ABC information on joint profit and fairness perceptions thus increases the buyer's profit only when buyer causes the inefficiency but not when the seller causes the inefficiency. Data Availability: Data are available from the first author upon request.