Outcome effects and capacity cost reporting

Lists research evidence that organizations are often unaware of underutilized capacity resources and examines the implications of explicit unused capacity reporting which identifies the cost of unused capacity, pointing out that although this information is useful, it may increase evaluator outcome effects. Describes an experiment to test this and shows that where unused capacity is reported biased performance evaluation results; and individual decision makers may inappropriately reduce capacity or increase production to avoid negative evaluations. Considers how management accountants can mitigate this effect, recognizes the limitations of the study and calls for further research.