Term
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Definition
| Continuous improvement mentality |
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Term
| Spinning only one dial at a time |
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Definition
| Try to calculate the specific, separable impact of each causal factor by varying only that factor while holding all others constant. |
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Term
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Definition
| Adding complexity sequentially, one layer at a time, beginning at a very basic commonsense level. |
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Term
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Definition
1. Predetermined standards or budgets
2. External Standards
3. Historical standards |
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Term
| 1. Predetermined standards or budgets |
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Definition
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Term
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Definition
1. Derived from the performance of other responsibility centers or companies in the same industry.
Benchmarking - identify company that they believe to be the best example
Problem:
1. Names of accounts are not the same
- XBRL looks to solve this |
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Term
| Limitations on standards (2) |
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Definition
1. The standard was not set properly
2. Although it was set properly in light of conditions existing at that time, changed coniditions have made the standard obsolete. |
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Term
| Engineered vs. discretionary costs |
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Definition
1. Favorable variance in engineered costs is usually an indication of good performance. Lower cost=better performance.
2. Discretionary expense centers are satisfactory if actual expenses are about equal to budgeted. Favorable variance may indicate that they r/c did not perform adequately. |
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Term
| Limitations of variance analysis (6) |
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Definition
1. Although it identifies where a variance occurs, it does not tell why the variance occurred, or what is being done about it.(high mktg exp)
2. Decide whether a variance is significant or not
3. As the performance reports become more highly aggregted, offsetting variances might mislead the reader.
4. As performance reports become more highly aggregated, mgrs become more dependent on the accompanying explanations and forecasts.
5. Reports only show what actually happened
6. Standard variances are limited to those things that we actually calculate standards for. Ex. worker morale. |
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Term
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Definition
| The monthly profit report should contain no major surprises. significant information should be communicated immediately as it occurs |
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Term
| Benefits of formal reporting (5) |
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Definition
1. It provides desirable pressure on subordinate managers to take corrective actions on their own initiative
2. Formal publication of information will be more accurate
3. Information from informal sources may be incomplete or misunderstood
4. Report may confirm or cast doubts on the information received from informal sources
5. Formal report provides a basis for analysis because information from the informal sources in general and imprecise. |
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