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Importance Of Past Data Analysis For Decision Making

Past data analysis is an important aspect of cost accounting. Measuring annual or periodic profit, including inventory costing, pertains mainly to events of the past. Cost control is related to the present period whereas planning, pricing, and analyzing data for decision making are future oriented.

These time frame oriented views of past data analysis  of Cost/ intertwine; e.g.

(1) Inferences may be drawn from the past periods as plans and decisions are made about the future  and

(2) Cost control should be designed to monitor the accomplishments of plans.

 Ranking these time frame categories as to their relative importance would certainly place the organization’s future as most important which is followed by what is presently occurring and lastly, by what has happened in the past. This ranking does not mean that data about the past are unimportant nor that they should be neglected, because past data analysis may aid in future decision making.

 After Past data analysis, performance must be reported to internal management as well as to external groups such as stockholders, creditors, the Internal Revenue Service and the general public. The point is not that the past performance is unimportant but rather that the cost accounting information system often does little more than account for the past without being adequately designed and utilized to focus on the present and future time-frames.

 Optimum attention to the past, present, and future, at a reasonable cost, should be the primary objective of the cost data provided by the information system. And the management should preserve all related data which will ensure past data analysis for future decision making properly.

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