Major decisions in manufacturing companies are being made with inadequate decision support tools. Traditional cost analysis contains assumptions that eventually lead to incorrect decisions. Cost accounting does not include adequate production models and assumes that costs are linear. Cost allocation rules used in these models may distort the perceived part costs and lead to incorrect decisions. The project is investigating a new method of analysis; a total system model. It creates a complete model of both the production system and the business expenses. Researchers are using queuing theory to model the production system. The cost model contains the production related costs as well as all non-production resources and their expenses. This data needs to be sufficient to create a financial statement for the manufacturing unit. Analyzing each possible scenario involves building a system model of that scenario. Decisions are made by comparing the system models of each possible scenario. This method of analysis avoids the pitfalls of traditional ost analysis and can answer previously unaddressed questions in a simple and understandable manner.The potential commercial application as described by the awardee: The potential market for a cost/benefit tool that can answer basic business questions such as "where, how much, and at what cost can I make products?" includes virtually every production and plant manager. The results of the research can become a basic tool used by industrial engineers and cost accountants in a daily fashion.
