13 - Performance measures and service costing Flashcards
gross profit margin formula
gp / sales x 100
net profit margin formula
np / sales x 100
ROCE formula
np / capital employed
capital employed = total assets - current liabilities
asset turnover formula
sales / capital employed
OR np margin x asset turnover
residual income
net profit - notional interest charge for invested capital
(difference between required and actual return)
what are service organisations
don’t make or sell tangible goods
characteristics of services
simultaneity = consumed same time as produced
heterogeneity = vary between customers
intangibility = no physical substance
perishability = cant be stored or worked on over time
cost per unit - service charge
total costs for a period / no of service cost units in the period
what is a composite cost unit
cost unit used when a single cost unit wouldnt be appropriate
can be used to monitor costs
eg, for air travel = per passenger per km
for hotels = per room per night
what is value for money
best possible combination of services from least resources
economy meaning
purchase of inputs of appropriate quality at minimum cost
effectiveness meaning
use of these inputs to achieve organisations goals
efficiency meaning
use of these inputs to maximise output
non financial performance indicators
measures of performance based on non financial information which operating departments use to monitor and control their activities
benefits of non financial performance indicators
- speed of access
- variety of measurement
- easy to calculate and understand
- can be quantitative/qualitative
- less likely to be manipulated
- good indicator of future prospects
