C Flashcards
sales volume variance
is the difference between the budgeted contribution margin at the actual volume and the original (static budget) budgeted contribution margin. It measures the change in profit that would expected from an actual volume that differs from the original budgeted volume.
when the product can have a mix variance or a variance in the usage of the substitutable materials when?
when a product has two or more ingredients that can be substituted for the one another.
how does the segment manager’s performance is measured ?
the segment manager’s performance is measured by controllable segment margin. Segment performance is measured by deducting fixed costs which are controllable by others from the controllable segment margin. Controllable segment margin = contribution margin - fixed costs controllable by segment manager contribution margin = sales - all variable costs
how does transfer pricing measures?
transfer pricing measures the value of goods or services furnished by a profit center to other responsibility centers within a company. These transfer prices may be set a market prices, or some other price agreed to between the responsibility center managers.
what is residual income
is the amount of income that a division has left over after incurring all of its expenses. A decision to focus on residual income as a performance evaluation measure would focus the divisional manager’s attention on cost cutting measures.
what is the effect of common cost?
common costs dilute the value of the segment margin on reporting profitability, so some businesses allocate common costs to segments only when all of most cost would disappear if the segment were to be discontinued.
what does balanced scorecard seeks?
it seeks to address the problems associated with traditional financial measures used to assess performance, the notion of value chain analysis plays a major role in the drawing up of a balance scorecard, and it relies on the perception of the users with regard to service provided.
what does income before taxes deducts?
income before taxes deducts all fixed and variable costs from a business unit’s profits except taxes. This measures forces a manager to be realistic about the level of profitability needed to sustain the unit.
when to accept any new project in the expected rate of return point of view?
to accept any new project, the expected rate of return on the new project should be higher than the firm’s cost of capital, meaning the company is making a profit from the new project. However, it can be lower than the divition’s current ROI so long as the return remains positive.
when does management by exception occurs?
a manager receives automated notices ob both favorable and unfavorable variations from the budget. management by exceptions flags exceptions for managers to concentrate on with the goal of more efficient management.
what is lifetime profitability?
is a financial measures that will determine if this customer will be profitable in the long run.
