Estimation of Acceptable Cost Tolerance Limits in Uncertainty Environments Using Monte Carlo Simulation

Due to the uncertainty in production processes, organizations must establish when a variation in cost with respect to a reference estimate is considered acceptable and when corrective, preventive or improvement actions must be taken. Considering tolerable values generates the idea that the cost is not a deterministic parameter, but that it can oscillate in a defined range, so that the estimates that belong to said range are considered normal and those that are outside generate intervention measures by part of decision makers. This paper presents a methodology that allows establishing the tolerance interval. The methodology uses an activity-based costing matrix model that incorporates Monte Carlo simulation to represent the inherent variability in each of the processes. The methodology was applied in a case study in the transportation sector, obtaining as a result the range of control values, which serves as the basis for making tactical and operational decisions within the organization.