Question

Much of cost accounting requires individuals to use their own judgment. Measuring costs is no exception. In your own words, explain why the use of judgment in cost measurement can lead to markedly different results even within the same firm. Would you not think that, at least within their own organization, management could establish some guidelines for ensuring that cost measurement is done primarily the same way by individuals within the organization? If so, how would that be accomplished? If not, why not? Use an example to illustrate your point.

Answer 1

• The reason why the use of judgment in cost measurement can lead to markedly different results even within the same firm because when it comes to judgment, what may be good and favorable for one person may differ with the next person.
• There are alternative ways for managers to define and classify costs.
• I believe that it is pertinent that within their own organization, management could establish some guidelines and standards for ensuing that cost measurement is done primarily the same way by individuals within the organization.
• The use of judgment in cost measurement can lead to different results even within the same firm because every individual has different perspective, hence their judgment can also be different.
• The reason for this is that the use of "judgment" is based on the cost measurement and cost associated within the firm.
• This can lead to different results within the same firm when cost measurement is conducted by different people with different "judgments" regarding costs and cost behavior.