Optimizing Accounting Decision Making Using Goal Programming

• Date: 01 January 2019
• DOI: http://doi.org/10.1002/jcaf.22369
• Published date: 01 January 2019

Optimizing Accounting Decision

Making Using Goal Programming

Clarence Goh

Management

accountants have a

key role in supporting

strategic decision

making in an organi-

zation. They are often

required to provide

information, interpre-

tations, and analysis

of alternative courses

of action that man-

agers are contemplating,

in areas including capital

budgeting, outsourcing,

product-mix, and the adding

or dropping of specific product

lines. To properly carry out

these tasks, management

accountants need broad

knowledge of their organiza-

tions’activities and the

ways those activities interact

(Hilton, Mahar, & Selto,

2006). As the operating

environment of organizations

grows more complex,

management accountants

must increasingly rely on

sophisticated analysis tech-

niques to help them perform

their tasks (ACCA, 2016).

One such analysis technique

is goal programming.

Simon (1955) suggests that

modern decision makers work

in complex environments and

are often faced with competing

objectives. In such decision

environments, it is often impos-

sible for decision makers to ful-

fill all objectives at the same

time. Instead, decision makers

must, in such settings, try

to achieve a set of goals (or

targets) as closely as possible.

Rather than strive to achieve

all goals, decision makers

should consider how decisions

involve possible trade-offs

among competing goals,

and aim to make decisions

that allow them to achieve

outcomes that come closest to

satisfying the goals under con-

sideration. In this respect,

given that goal

programming is a

multiobjective pro-

gramming technique

that relies on the

ethos of allowing

decision makers to

satisfy competing

objectives to the

best possible extent

(Tamiz, Jones, &

Romero, 1998), it represents an

important analysis technique

that management accountants

can employ to improve deci-

sion making in the modern

workplace.

The literature documents

various applications of goal

programming in accounting

decision making (see Aouni,

McGillis, and Abdulkarim,

2017 for a review). Charnes,

Cooper, and Ijiri (1963) were

the first to apply programming

in accounting decision making,

and examined how a goal pro-

gramming model could be used

to conduct breakeven analysis

involving two products, a con-

stant level of fixed costs and

two machine capacity con-

straints. In addition, Merville

Goal programming is a decision-ma king tech-

nique that seeks to help decision makers make

decisions that satisfy competing goals to t he best

extent possible. This article pro vides a descrip-

tion of goal programming, demon strates how it

can be implemented on a spreadsheet, and ill us-

trates its use through an example from manage-

ment accounting. © 2019 Wiley Periodicals, Inc.

© 2019 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22369 161