Expert system for cost variance investigation

Abstract

In a typical standard costing or budgetary control system, a manager might receive a variance analysis reporting several hundred variances, of which many may have arisen due to random factors, or may be too insignificant to merit attention. The managers uses his knowledge and experience to identify the important variances which demand further investigation. Both management accounting theory and statistical decision theory can make significant contributions towards improving this decision, but both make extravagant demands on the manager in terms of the theoretical and factual knowledge expected of him. Much of this knowledge, even if available, is scattered throughout the organization with very little readily accessible to top management itself. This research takes the view that a knowledge. Base / Expert System approach can be useful in this context.