tools-for-enterprise-performance-evaluation

Graphics are frequently used to facilitate

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Unformatted text preview: business. Graphics are frequently used to facilitate understanding by those not accustomed to accounting reports. For example, each store supervisor knows that fries and drinks have the highest profit margins and they are encouraged to train employees to soft-sell these items by asking customers “what type of drink did you prefer?” rather than “did you want a drink with this order?” As a result, the report is “specialized” to show the product mix proportions. In addition, each manager gets a bonus if food costs are below 20% of sales; this incentive is designed to reduce food waste and encourage sales of high margin products. The report provides sufficient detail to show if the objectives are being met. Notice that unfavorable variances are highlighted in red. Summarizing the results for Location A, note that the budgeted goal for hamburger sales was not met. But, the profit objectives were nevertheless exceeded because the product mix of fries and drinks produced offsetting higher margins. In addition Location A managed to contain other variable costs. Looking for a career where your ideas could really make a difference? UBS’s Graduate Programme and internships are a chance for you to experience for yourself what it’s like to be part of a global team that rewards your input and believes in succeeding together. Wherever you are in your academic career, make your future a part of ours by visiting www.ubs.com/graduates. www.ubs.com/graduates Download free ebooks at bookboon.com 12 Responsibility Accounting and Management by Exception Tools for Enterprise Performance Evaluation The next step up in the organizational chart is the Senior Manager of Store Operations. This person is concerned with making sure that each unit is profitable. Underperforming stores are identified, problems are studied, and corrective measures are taken. Very little time is spent on locations that are meeting or exceeding corporate profit goals. Although this manager has access to the detailed reports for each store, the performance report of interest is a compilation of summary data for each location that quickly highlights the areas of needed improvement. Review the following performance report, noting the carry forward of Location A’s data into the report. Obviously, some stores are performing much better than others; the senior manager will certainly want to focus on store E immediately! Also notice that there is $1,500,000 of fixed costs associated with store operations that are not traceable to any specific location; nevertheless, the senior manager of store operations must control this cost and it is subtracted in calculating the overall margin. Thus, the total fixed cost for all store operations is $9,500,000 ($8,000,000 + $1,500,000). PERFORMANCE REPORT -- ALL STORES FOR THE YEAR ENDING DECEMBER 31, 20X5 Combined Location A Location B Location C Location D Location E Location F Location G Sales: Burgers Fries Drinks Total Sales Less: Variable Exp. Foo...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.

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