Take Action

Home | Faculty & Research Overview | Research

Research Details

A Simulation Analysis of Alternative Cost Variance Investigation Models, Accounting Review

Abstract

The article presents a simulation analysis of alternative cost variance investigation models. In past some authors have suggested that the lack of application of more complex cost variance investigation models could be due either to management's lack of awareness or to the fact that the stochastic cost processes assumed by these models are not descriptive of processes which generate actual costs. Results of some studies made in this field indicate a number of other possibilities for the lack of application. A rational manager who is evaluated on the basis of his or her operating results or on the number of times he or she makes the budget may well prefer a naive cost investigation rule. More important, a manager who is concerned with all costs could very well prefer a less complex investigation rule. As a result, survey research, which seeks to determine the acceptance of the more sophisticated cost investigation models, also should determine the basis on which the decision-maker is evaluated and rewarded, since this will affect his or her model choice. These same considerations should be taken into account in the development of cost variance investigation models which employ more complex stochastic processes.

Type

Article

Author(s)

Robert Magee

Date Published

1976

Citations

Magee, Robert. 1976. A Simulation Analysis of Alternative Cost Variance Investigation Models. Accounting Review. 51(3): 529-544.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more

Take Action