Optimizing Accounting Decision Making Using Goal Programming

Date01 January 2019
Published date01 January 2019
Optimizing Accounting Decision
Making Using Goal Programming
Clarence Goh
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 specic product
lines. To properly carry out
these tasks, management
accountants need broad
knowledge of their organiza-
tionsactivities 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-
ll 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
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 rst 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 xed 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

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