Affiliations: Opus College of Business, University of St. Thomas, 1000 LaSalle Avenue, Minneapolis, USA
Correspondence:
[*]
Corresponding author: Sameer Kumar, Opus College of Business, University of St. Thomas, 1000 LaSalle Avenue, Minneapolis, MN 55403-2005, USA. Tel.: +651 962 4350; E-mail: skumar@stthomas.edu
Abstract: This paper is intended to meet two objectives. First, we believe the current financial crisis demands that we assess how effectively our current curriculum develops our cost accounting students’ ability to think probabilistically and assess risk. This requires a paradigm shift in how they are taught probabilistic thinking. And second, we share exercises authors have used to expand cost accounting students’ ability to think probabilistically. In the current paradigm, cost accounting students are taught to think of cost and forces affecting costs with certainty. There is no probabilistic analysis of the risks and uncertainty in these costs estimates. Students have learned to do sensitivity analyses. However, this paper explores Simulation Modeling, in which cost and the forces influencing costs are treated as random variables. The student learns to think probabilistically. The resulting cost estimate is a distribution, which exposes the risks and uncertainty in this cost to a much greater degree than sensitivity analysis does.
Keywords: Assumptions, critical thinking, deductive reasoning, deterministic thinking, distributions, expected value, inductive reasoning, paradigm shift, probabilistic thinking, systems thinking, random variable and simulation modeling
