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Inappropriate standards (or targets):
This is a problem arising from deficiencies in planning. If not enough time and resources are devoted to setting accurate standards in the first place, and if they are not kept up to-date, subsequent performance is highly likely to deviate from what was expected.
Mis-measurement of actual results: Scales may be misread, the pilfering of wastage or materials may go unrecorded, items may be wrongly classified (as material X3 say, when material X8 was used in reality), or employees may make ‘cosmetic’ adjustments to their records to make their own performance look better than it really was.
Implementation breakdown:
This means that for a variety of causes employees will not always implement the plan in the way that was intended. The classic example is the purchase of raw materials at a lower than budgeted price, causing quality problems for production. Such problems may arise whether employees act with the best intentions or whether they deliberately take their own course because they do not agree with the plan. They may also be caused by poor communications or inadequate training.
opening stock 19000 closing stock 21000 sales 200000 gross profit 25% on sales calculate stock turnover ratio
Product life cycle Every product has a life cycle. The life cycle of a product vary from months to various years. For example in the case of cameras photocopying machines etc.
The decisions about long-term investment are depends on judgments on future cash flows, the improbability of such cash flows and the opportunity cost also of the funds to be invest
M/s ABC's present credit terms are 1/10 net 30 that they are planning to change to 2/10 net 30. The current average collection period is 20 days and the variable cost to sales rat
Prerequisites of a sound variances analysis system A variance analysis system would be good enough in controlling costs and evaluation performances if the following requirement
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Parameter prediction error: This is another aspect of faulty planning. As Hongren says, ‘planning decisions are based on predictions of future costs, future selling price, fut
Standard costing system However, it has been argued that traditional variance analysis is unhelpful and potentially misleading in the modern organization, and can make managers
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