research Windyastuti, et al, 2005, it is proven that the degree of selling, general and administrative cost stickiness in growing economic condition is greater.
This research is to measure the stickiness of selling, general and administrative cost on net sales and the degree of stickiness cost of Indonesia’s manufacturing industries
associated with adjustment cost asset and employee intensity before, during, after economic crisis.
II. LITERATURE HYPOTESIS The Stickiness of Selling, General and Administrative Cost
Selling costs include cost of promoting, selling, and distributing products and services, can be divided into fixed, variable, and semi-variable costs. Actually, these costs
move based on their behavior costs respond mechanically to activity volume. However, in Noreen Soderstrom research Anderson, et al, 2004, it is shown that selling, general
and administrative costs vary with sales volume but do not change proportionately with changes in sales revenue asymmetric cost behavior. These costs increase more when
volume rises than the decrease when volume fallen by an equivalent amount. It is called as sticky cost by Anderson, Banker, Janakiraman Medeiros Costa, 2004.
The stickiness of cost happened because of the management intervention in deliberate decisions. It is said that cost stickiness is consistent with a model in which
managers deliberately adjust resources as response to changes. This opinion is supported by the evidence research that is done by previous researches, such as Medeiros et al.
2004 in Brazilian firms, Anderson et al. 2005 in Southwest Airlines, Windyastuti et al. 2005 in Indonesia firms listed in Jakarta Stock Exchange. When company’s revenue
decreased, managers must decide whether to maintain resources and bear the costs to maintain that resources or reduce unutilized resources and incur the adjustment costs. If
managers believe that better condition will happen in the near future temporary decline revenue, they will choose to maintain resources and delay adjustment cost.
The degree of cost stickiness associated with adjustment cost
It is stated in the previous that sticky cost is consistent with the way that managers manage cost managerial mode. Managers deliberately adjust resources in response to
changes in volume. Hence, the degree of cost stickiness is sensitive to the variables that proxy for adjustment cost such as employee intensity, asset intensity.
The degree of cost stickiness associated with employee intensity
It is common for companies to face a fluctuated demand, moreover in this globalization era with tight competition. Thus, it is important to the company to have
good resource employees in order to win this competition. There are several ways that a company has done in having good employees, such as doing recruitment, training, giving
award for a good performance, etc. When a company’s sales decrease, it is difficult for company to fire the employee to do adjustment cost moreover, company that owns the
high employee intensity because company believes the better demand in the near future and firing will be costly.
The degree of cost stickiness associated with asset intensity
Beside employee intensity, asset intensity also gives impact on selling, general, and administrative cost stickiness. When net sales decreased, management will reduce the
number of purchased resources or even stop the purchased. It is easy to reduce or even stop the purchase if management buys from outside. Nevertheless, the condition will be
different for company that uses own resource company’s assets. Selling the assets will give lose for company because the company has to pay selling costs and loses firm
specific investment.
The impact of economic condition with the degree of cost stickiness
The economic condition of country in a certain time can give an influence in all activities. It also influences the degree of cost stickiness. It is like what Anderson et al.
2003, cited in Anderson, et al, 2005 said that the degree of stickiness is sensitive to expect permanence of activity change such as, macro-economic growth, previous
period’s activity. This opinion is also supported by Windyastuti et al. 2005 research.
Hypothesis Formulation
Hypothesis can be formulated, as follows:
H
1a
: The selling, general and administrative cost stickiness happened before economic crisis H
1b
: The selling, general and administrative cost stickiness is avoided during economic crisis. H
1c
: The selling, general and administrative cost stickiness happened after economic crisis H
2a
: The degree of cost stickiness increased with the employee intensity of manufacture before economic crisis period.
H
2b
: The degree of cost stickiness did not increase with the employee intensity of manufacture during economic crisis period.
H
2c
: The degree of cost stickiness increased with the employee intensity of manufacture after economic crisis period.
H
3a
: The degree of cost stickiness increased with the asset intensity of manufacture before economic crisis period.
H
3b
: The degree of cost stickiness did not increase with the asset intensity of manufacture during economic crisis period.
H
3c
: The degree of cost stickiness increased with the asset intensity of manufacture after economic crisis period.
III. RESEARCH METHOD Population and Sample
