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# Critically evaluate the use of costing techniques for management decision making as well as the specific use of absorption and variable costing systems.

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I have to submit an assignment and I do not know where to start -

Critically evaluate the use of costing techniques for management decision making as well as the specific use of absorption and variable costing systems.

I know about absorption and variable - but I cannot evaluate the use of costing tehniques for decision making

#### Solution Preview

THE USE OF COSTING TECHNIQUES FOR DECISION MAKING
To sustain competitive advantage in a global environment, an organization needs to be equipped with the latest quantitative techniques. Most of these are no IT based. A good basic textbook I would refer you to is Exploring Corporate Strategy by Johnson and Scholes. Quantitative applications for cost analysis include:

- Statistical analysis and evaluation (mean +/- s.e.m.; Chi-square tests)
- Linear programming and opportunity cost
- The learning curve
- Program Evaluation and Review Techniques (PERT) and Critical Path Planning
- Optimization-based costing
- Forecasting techniques and their applicability
- Regression analysis and correlation analysis
- Cost-volume-revenue analysis
- Cost-volume-profit and breakeven analysis
- Contribution margin analysis
- Leverage analysis techniques
- Analysis of cost behavior, cost estimation and allocation
- Inventory analysis tools

I have written extensively below the use of a tool indecision making. This is called Cost/Benefit Analysis. It is a useful tool in that it evaluates quantitatively whether to follow a course of action as found in the analysis of Critical Path Planning. The tool is described below:

1) TOOL ...

#### Solution Summary

Here is just a sample of what you'll find in this solution:

"KEY POINTS. Cost/Benefit Analysis is a powerful, widely used and relatively easy tool for deciding whether to make a change. To use the tool, firstly work out how much the change will cost to make."

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