Concept Of Decision Making
Business have limited resources . One of the most important tasks of management is to allocate these resources effectively and efficiently to achieve the company's goals and objectives. Accounting information can improve managements understanding of the results of alternative resource allocation. That is , one of the major roles of the cost management information system is to supply cost and revenue data that are useful to tactical decision making. Decision making is one of the major functions of management. It is very important and difficult task of management.
Decision making can be defined as making choice between future uncertain alternatives. A short term practical decision making consists of choosing among alternatives with an immediate or limited end in view. It must be emphasis that all decision making relates to the future and that a decision is a choice between alternatives in pursuit of objectives. Where no alternatives exist no decision can be made and nothing can be done now that will alter the past. Therefore, decision making is concerned with the future and involves the act of selecting one course of action from various courses of action.
Tactical (Short-Term) Decision Making Process
The tactical decision making process involve following steps:
1. Recognize and define the problem.
2. Identify alternatives which are possible solution to the recognized problem and eliminate alternatives that are not feasible.
3. Identify the predicted cost and benefits associated with each feasible alternative. .
4. Compare the relevant costs and benefits for each alternatives and relate each alternative to the overall strategic goals of the firm and other qualitative factors.
5. Select the alternative with greatest benefit which also supports the organization's strategic objectives.
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