Parameter prediction error-randomness of operating process, Managerial Accounting

Assignment Help:

Parameter prediction error:

This is another aspect of faulty planning. As Hongren says, ‘planning decisions are based on predictions of future costs, future selling price, future demands and so on. In many cases there will be a difference between the actual value and the predicted value’. Such differences are not only due to uncertainty about the future: the predictions may not have taken proper accounts of conditions existing at the time when it was made, like a recently agreed pay rise, or an agreement to increase wages in three months time.

Inappropriate decision models:

Variance can arise when chosen decision model fails to capture important aspects affecting the decision. The solution to a linear programming model can be used when setting standards for direct material purchase prices. These standards, however, may be inappropriate if the LP solution is not feasible because the LP models fail to recognize a constraint on labor availability or storage capacity’. (It is the relationship between the variables that causes the problem here, not the failure to predict accurately.)

Randomness of operating processes:

A standard is an average figure: really it represents the mid-point of a range of possible values and therefore individual measurements taken at specific times will deviate unpredictably within this predicable range.


Related Discussions:- Parameter prediction error-randomness of operating process

Decision making process, Decision Making Process Decision making is the...

Decision Making Process Decision making is the process of choosing among alternatives. There are 7 steps that should be followed as shown in figure below:   Figure:

What rights do the stockholders have, When forming a company, the options a...

When forming a company, the options are sole proprietor, partnership, and corporation. Most choose corporation. Why is the corporate form seen to be best? What rights do the stockh

Alternative performance measures, Alternative performance measures Ther...

Alternative performance measures There are various measures that can be used to measure performance of a decentralized company. The major ones are: •    Return on Investmen

Decision - making, Decision Making Some managers appear to have an...

Decision Making Some managers appear to have an intuitive sense of good decision making. The reality is that good decision making is hardly ever done by intuition. Consist

Define materials cost variance, Define Materials cost variance Material...

Define Materials cost variance Material cost variance (MCV) is the difference between the standard cost of material specified and the actual cost of materials used." It is the

Jit purchasing-jit aims, JIT purchasing On the other hand is a purchasi...

JIT purchasing On the other hand is a purchasing system in which material purchased are contracted so as that the receipt and usage of materials to the maximum extent possible,

Line of credit, It is a commitment by a bank to lend a specific amount of f...

It is a commitment by a bank to lend a specific amount of funds on demand identifies the maximum amount of unsecured credit the bank will allow the customer to borrow at any time.

Temporary closure of factory or department, TEMPORARY CLOSURE OF FACTORY OR...

TEMPORARY CLOSURE OF FACTORY OR DEPARTMENT Here there is a similar situation to that of discontinuance of a product such as Model N40. A factory which is expected to earn some

Break even analysis, I need an example on how to solve a single and two pro...

I need an example on how to solve a single and two product bundle

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd