This is very inefficient and may have the undesirable

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Unformatted text preview: ery inefficient and may have the undesirable outcome of forcing management to make decisions based on incomplete information. Increasingly, companies are developing customized electronic data base systems that capture data and store it in such a way as to enable accurate and real time retrieval of information relevant to an almost endless number of potential questions. 1.9 Traceable Versus Common Fixed Costs You likely noticed that the above reports separated out variable and fixed expenses. The fixed expenses were further divided between those that were traceable to a specific business unit and common fixed costs. Traceable fixed costs would not exist if the unit under evaluation ceased to exist. Common fixed costs support the operations of more than one unit. Great care must be taken in distinguishing between traceable and common fixed costs. Remember that effective performance evaluations require a clear alignment of responsibility and accountability. To the extent a unit manager is burdened with allocations of common costs, poor signaling of performance can result. This is why such costs are usually segregated out in performance based reporting methods. This topic will be further explored in the next chapter’s discussion of segment reporting. Download free ebooks at 14 Responsibility Accounting and Management by Exception Tools for Enterprise Performance Evaluation 1.10 Management by Expansion “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.” These sentences are taken directly from the preceding discussion about how the senior manager of store operations uses the performance reports. This is an excellent illustration of what is meant by the concept of management by exception. The objective of management by exception is to focus attention on areas where corrective measures appear necessary. Performance evaluation tools that do not satisfy this objective are of little value. Importantly, not every exception requires a remedy. One characteristic of a strong manager is the ability to study problems, and differentiate between those requiring a solution and those that simply happened because of bad luck. 360° thinking Please click the advert . 360° thinking . 360° thinking . Discover the truth at © Deloitte & Touche LLP and affiliated entities. Discover the truth at © Deloitte & Touche LLP and affiliated entities. Download free ebooks at 15 Discover the truth at © Deloitte & Touche LLP and affiliated entities. © Deloitte & Touche LLP and affiliated entities. D Flexible Budgets Tools for Enterprise Performance Evaluation 2. Flexible Budgets 2. Flexible Budgets The previous chapter provided a comprehensive budget illustration using a static budget. The static The previous which is developed for a single level of acti...
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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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