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Steps of choosing an accounting based performance measure
Consider the overall goal of the organization as a whole. It is important to choose a measure of accomplishment that represents top management goals. Such measures include operating income, net income, Return on investment (ROI), sales, etc. Determine whether the measure should be maximized or minimized.
1) Select definitions for such items as income and investments (i.e. should income be based on variable or absorption costing? Must central overheads be allocated? should investments consist of total assets, net assets or net worth?)
2) How should items such as income and investments be measured (i.e. should we use historical costs, replacement costs, realizable or current values?)
3) Determine the standards that should be applied (i.e. should all divisions be required to earn the same rate of return on all investments?)
4) What timing of feedback is needed? Should it be monthly or quarterly?
POINT ESTIMATE OF PROBABILITIES This approach requires a number of different values for each of the uncertain variables to be selected. These might be values that are reasonabl
Positioning An essential part of the planning process is positioning the organization to attain its goals. Positioning is a wide concept and depends on gathering and evaluating
what is a base of managerial accounting
BENCH MARKING In the current business environment, organizations are under a lot of pressure to improve performance and that of their divisions or subsidiaries. Bench marking i
Why might managers favour this ABC system instead of the older system that allocated all MOH costs on the basis of direct? labour?
1)Prepare a three (3) year forecast of estimated future cash flows for you company and give valid economic/business reasons for your projections. This means you will have a stateme
1. Explain the modern control methods with examples. 2. What are the reports produced for performance measurement? Demonstrate.
Advantages of kaizen costing 1) Record individual tasks 2) Instantly replay observation 3) Select and use best practice 4) Categorize activities using kaizen terminolo
Advantages of ratio analysis 1) Helpful in financial analysis: financial analysis is easier if accounting ratios are used to analyze the different financial statement relatio
State the factors of CVP The three factors of CVP analysis I e cost volume and profit are interconnected and dependent on one another . for example profit depends upon sales se
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