SENSE Exhibit 2.6 Matching Data Analytic Types to Cost Management Analyses Data Analytic Type Descriptive Diagnostic Predictive Question Cost Management Analysis Example Answered What is happening? A profit and loss analysis assesses historic trends in the company's profitability. Why is it What-if (i.e., sensitivity), root cause, and activity happening? driver analyses decipher the significant drivers that cause changes in key revenues and costs. What is likely to Forecasting and budgeting analyses predict happen? customer demand patterns to help the company more effectively synchronize its service provision and product manufacturing capabilities. What do I need to Strategic cost management analysis identifies do? specific process reengineering actions to reduce the cost of service provision and product manufacturing activities. Prescriptive Data Analytics and Cost Management Read the following brief descriptions (a through f) of various cost management analyses. Select each description into the data analytic type to which it most likely belongs (Note: A type can be used more than once): Required: a. A multiple regression analysis finds that the number of orders requiring special handling activities represents a significant driver of overhead costs. b. A Monte Carlo simulation uses data from the accounting information system to forecast the incremental costs of different new store location scenarios under consideration. c. A linear programming optimization model shows the maximum profitability service mix for a spa and wellness center constrained by the number of certified professionals it can employ each year. d. A ratio analysis of historical data reveals an upward trend in warranty costs. e. An IBM Watson-based sentiment analysis of customer text messages provides insights regarding their willingness to pay for costly new product features. f. An Excel-based spreadsheet analysis of overhead costs demonstrates that a large favorable spending variance is outweighed by an even larger efficiency variance (refer to Exhibit 2.6 for a review of data analytic types). SENSE Exhibit 2.6 Matching Data Analytic Types to Cost Management Analyses Data Analytic Type Descriptive Diagnostic Predictive Question Cost Management Analysis Example Answered What is happening? A profit and loss analysis assesses historic trends in the company's profitability. Why is it What-if (i.e., sensitivity), root cause, and activity happening? driver analyses decipher the significant drivers that cause changes in key revenues and costs. What is likely to Forecasting and budgeting analyses predict happen? customer demand patterns to help the company more effectively synchronize its service provision and product manufacturing capabilities. What do I need to Strategic cost management analysis identifies do? specific process reengineering actions to reduce the cost of service provision and product manufacturing activities. Prescriptive Data Analytics and Cost Management Read the following brief descriptions (a through f) of various cost management analyses. Select each description into the data analytic type to which it most likely belongs (Note: A type can be used more than once): Required: a. A multiple regression analysis finds that the number of orders requiring special handling activities represents a significant driver of overhead costs. b. A Monte Carlo simulation uses data from the accounting information system to forecast the incremental costs of different new store location scenarios under consideration. c. A linear programming optimization model shows the maximum profitability service mix for a spa and wellness center constrained by the number of certified professionals it can employ each year. d. A ratio analysis of historical data reveals an upward trend in warranty costs. e. An IBM Watson-based sentiment analysis of customer text messages provides insights regarding their willingness to pay for costly new product features. f. An Excel-based spreadsheet analysis of overhead costs demonstrates that a large favorable spending variance is outweighed by an even larger efficiency variance (refer to Exhibit 2.6 for a review of data analytic types)