A Cost Variance Investigation Using Belief Functions

Abstract

Using belief functions, this paper develops a model of the situation of a management team trying to decide if a cost process is in control, or out of control and, thus, in need of investigation. Belief functions allow accounting for uncertainty and information about the cost processes, extending traditional probability theory approaches. The purpose of this paper is to build and investigate the ramifications of that model. In addition, an example is used to illustrate the process.

Citation

Lin, T.W., O’Leary, D.E. and Lu, H. (2006), "A Cost Variance Investigation Using Belief Functions", Lawrence, K.D. and Klimberg, R.K. (Ed.) Applications of Management Science: In Productivity, Finance, and Operations (Applications of Management Science, Vol. 12), Emerald Group Publishing Limited, Leeds, pp. 253-263. https://doi.org/10.1016/S0276-8976(06)12017-9