Question

Please describe the constraints on modeling the way costs behave (in managerial cost framework).

Answer 1

Majorly there are five constraints on modeling the way costs behave in managerial cost framework:

1.Objectivity: The main theme of objectivity is that the basis on which managerial costing information is selected should be unbiased, The information selected should be from an independent source.

2.Verifiability: The main objective of verifiability is to design the model framework such that the readers of such information arrives at a similiar kind of conclusions.

3.Measurability: This measurability constraint demands the model framework to create model with better relationships that are measurable with some reasonable amount of work.

4.Materiality: This materiality constraint highlights the fact that the benefits that are going to accrue by designing this model should necessarily be higher than the cost that has been spent for implementation of model.

5.Accuracy: Accuracy deals with the objective that to what extent the model is able to display better results that are intended by the user, it should not be vague.