Financial and nonfinancial information for operating people

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Reference no: EM13259499

The manager of a large semiconductor production department expressed his disdain for the cost information he was presently given:

Cost variances are useless to me. I don't want to everhave to look at a cost variance, monthly or weekly. Daily, I look at sales dollars, bookings, and on-time delivery (OTD)-the percent of orders on time. Weekly, I look at a variety of quality reportsincluding the outgoing quality control report on items passing thefinal test before shipment to the customer, in-process quality, andyields. Yield is a good surrogate for cost and quality. Monthly, Ido look at the financial reports. I look closely at my fixed expenses and compare these to the budgets, especially ondiscretionary items like travel and maintenance. I also watch head count.

But the financial systems stilldon't tell me where I am wasting money. I expect that if Imake operating improvements, costs should go down, but Idon't worry about the linkage too much. The organizationaldynamics make it difficult to link cause and effect precisely.

Required:

Comment on this production manager's assessment of hislimited use for financial and cost summaries of performance. Forwhat purposes, if any, are cost and financial information helpfulto operating people? How should the management accountant determinethe appropriate blend between financial and nonfinancial information for operating people?

Reference no: EM13259499

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