Session 20 - Accounting 102 Session 20 20 1 Responsibility...

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Accounting 102Session 20Session 20
Responsibility Accounting andPerformance EvaluationPerformance Evaluation(B dtd ViAli )(Budgets and Variance Analysis)
Responsibility Accounting, Performance Evaluation and Budgets
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Performance Evaluation and VariancesVariances serve several purposes. They are used:a)As a Part of Responsibility Accounting and Performance Evaluationa)As a Part of Responsibility Accounting and Performance Evaluationto communicate to employees how well they have performed relative to expectations, andas input into salary and bonus decisions:e.g., Pay = Salary + % of (Actual - Budgeted results)b)As Feedback To Indicate Why Actual Results Differed fromExpectations:Expectations:Did the firm produce and/or sell more (less) than budgeted?Were inputs cost more (less) than budgeted?5Were the input quantities used more (less) than budgeted?
)FPCtl PdtiPlid S h d lic)For Process Control, Production Planning and SchedulingCost variances may suggest the need to make improvements to the production processthe production process.Example: A consulting engagement was over budget.Example: A consulting engagement was over budget. Is that because too much time was spent on the project or

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