Decision Making Techniques in Managerial Accounting

876 Words Jun 18th, 2018 4 Pages
Managerial accounting comprises all the financial information needed to help managers make educated decisions and do their job duties efficiently. A typical manager’s responsibilities with managerial accounting include interpreting finance reports and projections and using those to make financial decisions that will affect the company. Since managers have to make routine decisions and finalize reports periodically, it is vital that they are able to conduct healthy decision making processes and are able to come to make quick educated conclusions. While there are plenty of decision making models to utilize with business situations, when it comes to making maximizing decisions the best one to use is the rational decision-making model.

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The Rational Decision-Making model is filled with eight steps that ensure through review of all items and possibilities that occur. The first step is to identify the problem at hand, the second step is establishing selection criteria in order to filter all candidates, and the third step would be evaluating the previous set criteria for true importance and rank. The forth step is making substitutes for all options and then step five is assessing those completely. The sixth step is choosing the best choice and step seven is when the final decision is put into practice. Last, the final most important step is to regroup and review the decision and how it affected the problem (Bauer & Erdogan, 2010).

When making decisions it is imperative that the prime decision maker keeps in mind various traps that will hinder the entire process. These barriers can cloud judgment, completely delay the process of giving a final verdict, or can serve as a devastating lost to the decision maker because of bad choices. The most delaying trap that can occur doing normal decision making processes is called analysis paralysis, which happens by gathering too much information and not being able to reach a final consensus because of it (Bauer & Erdogan, 2010). Another very common fatal trap is anchoring, which occurs when too much emphasis is placed on a single amount of information or selection
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