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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.
Innova uses 1,056 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows. Direct material
Bridge loans are obtainable from the banks and financial institutions while the source and timing of the funds to be raised is identified along with certainty. While there is a tim
Gather Data about Alternatives When potential areas of activity are specified, management must assess the potential growth rate of the activities, the capability of the company
Consortium Lending: As the financial needs of a single unit are more than a single bank can cater to, then more than one bank comes together to finance the unit jointly spreading
Significance points of Variance The following significant points must be kept in mind: Controllability: Controllability should also influence the decision whether t
Transition probabilities These are the probabilities of moving from one state to another in the next time period. Usually they are written in the form of a probability matrix.
What is Direct material cost variance It can be defined as the difference between the standard costs of direct material specified and the actual cost of direct material used.
Comparing real and planned outcomes and responding to Divergences from Plan The final phases in the process outlined in figure shown below of comparing real and planned outcome
Break even point or B.E.P. pricing method : Break even point is the volume of sales at which the total sale revenue of the product is equal to its total cost. In other words, it
C-V-P ANALYSIS UNDER UNCERTAINTY A major limitation of the basic C.V.P analysis is the assumption that the unit variable cost, selling price and the fixed costs are constant an
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