ISSN:
1540-5915
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
Previous work on probabilistic profit budgets has dealt with the construction of probability intervals for the items in the planning and control statements (e.g., direct costs, marginal contributions, profits, etc.). This paper expands that work by demonstrating the potential benefits for managerial accounting in constructing confidence limits for the mean, the standard deviation, and the coefficient of variation. The adequacy of the confidence interval for any account balance depends on the credibility of the sample standard deviation, s, as an estimate of the population standard deviation, σ. The confidence interval of the standard deviation assesses, in a sense, the precision of the point estimate, s. Furthermore, it takes on a meaning similar to risk measures discussed in the finance literature. Given confidence intervals for the mean and standard deviation, one can construct corresponding bands for the coefficient of variation. These bands give insight into the goodness of the accounting system and the stability of the budgetary model.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1540-5915.1975.tb01001.x
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