February 27, 2013
Different Managerial Purpose and Decisions
I start this presentation with information about cost information and how it supports different managerial purposes and decisions.
Cost information support different managerial purpose and decisions
Program managers use cost information in making decisions to improve operating economy and efficiency. Cost information is used for several purposes like:
• Budgeting and cost control: Cost information helps in reviewing budget for future. After approval and execution of budget, cost of information act as feedbacks to budgets. With the help of cost information, managers can control and reduce the cost and can also avoid wastage.
Performance measurement: this purpose is related with the measuring of program efficiency, effectiveness and program results. In performance measurement, measuring cost is an integral part to measure efficiency and cost-effectiveness. Efficiency can be measured by comparing output with input and cost-effectiveness can be measured by determining the degree to which the objective is met.
• Making economic decisions: There are many decisions that involves alternative choices like whether to begin a project in-house or to contract it out, whether to accept a proposal or reject the proposal, whether continuing production particular products or stop it. To arrive at decisions from these alternative choices, cost information plays a very important part.
• Evaluating programs: Evaluating programs involves evaluation of cost of resources used in making policy decisions. These decisions involved social and economic costs and benefits affecting different sectors of the economy.
• Determining Reimbursements and Setting Fees and Prices: In setting fees and reimbursements, cost information is needed. Pricing and costing are...