In the Cost Variance Analysis chapter, Chapter 17 of our text, two important concepts relating to Classical Statistical Theory and Decision Theory are covered. Please review and discuss your experience with these theories and how the application could be applied to your work place.
1. (Classical Statistical Theory) Discuss how the calculation of the coefficient of variation (ratio of the standard deviation to the mean) can be applied in budget variance analysis and what budget models is the application best applied.
2. (Decision Theory) Discuss how sensitivity analysis can be utilized in cost control using examples when preventative or detective objective measure values are not available.