@article{6015b93f99da41bbb919c2c81bcb5b25,
title = "Obtaining Informationally Consistent Decisions When Computing Costs with Limited Information",
abstract = "We demonstrate the need to view in a dynamic context any decision based on limited information. We focus on the use of product costs in selecting the product portfolio. We show how ex post data regarding the actual costs from implementing the decision leads to updating of product cost estimates and potentially trigger a revision of the initial decision. We model this updating process as a discrete dynamical system (DDS). We define a decision as informationally consistent if it is a fixed-point solution to the DDS. We employ numerical analysis to characterize the existence and properties of such solutions. We find that fixed points are rare, but that simple heuristics find them often and quickly. We demonstrate the usefulness and robustness of our methodology by examining the interaction of limited information with multiple decision rules (heuristics) and problem features (size of product portfolio, profitability of product markets). We discuss implications for research on cost systems.",
keywords = "cost accounting, costing systems, dynamical systems, heuristics, numerical experiment",
author = "Vic Anand and Ramji Balakrishnan and Eva Labro",
note = "Funding Information: We thank Brian Mittendorf (senior editor), Anil Arya (departmental editor), and two constructive referees. We thank the following for comments and suggestions: Rob Bloomfield, Eddy Cardinaels, Hui Chen, John Christensen, Liz Chuk, Harry Evans, Steve Hansen, Bj?rn Jorgensen, Lisa LaViers, Peter Letmathe, Drelenys Lu, Bob Magee, Tatiana Sandino, Karl Schuhmacher, Frank Selto, K. Sivaramakrishnan, William Spears, Madhu Venkadesan, Anja De Waegenaere, Jerry Zimmerman, and Jake Zureich. We also thank workshop participants at University of Colorado (Boulder), Cornell University, EIASM Workshop on Accounting and Economics, HEC (Paris), Indiana University, INSEAD, Maastricht University, University of Michigan, University of Pittsburgh, University of Southern California, Texas A&M University, the Tel Aviv International Accounting conference, University of Washington, and Washington University in St. Louis for comments on earlier versions of this work. We gratefully acknowledge the financial support of the Institute of Management Accountants' Foundation for Applied Research, as well as Emory University's Goizueta Business School, The University of Iowa's Tippie College of Business, and the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. Eva Labro also gratefully acknowledges financial support of the Ernst & Young fund. Publisher Copyright: {\textcopyright} 2016 Production and Operations Management Society Copyright: Copyright 2017 Elsevier B.V., All rights reserved.",
year = "2017",
month = feb,
day = "1",
doi = "10.1111/poms.12631",
language = "English (US)",
volume = "26",
pages = "211--230",
journal = "Production and Operations Management",
issn = "1059-1478",
publisher = "Wiley-Blackwell",
number = "2",
}