Chapter 8 - Performance indicators in budgetary control

Question 1

Absolute figures

Answer 1

How much materials, labour etc has been used - the kg or hours

Question 2

Percentage terms

Answer 2

How much material, labour etc is used as a percentage of the total material, labour etc used in the day.

Question 3

Simple financial measures - Average selling price per unit

Answer 3

This could be compared against the retail price to give an idea of how much the price has been discounted to achieve actual volumes

Question 4

Simple financial measures - Profit as a % of sales revenue

Answer 4

This could be based on gross or net profit and could be compared with other businesses to see how much the business % return on sales compare to competitors

Question 5

Simple financial measures - Materials cost per unit of purchase

Answer 5

When compared with the total unit cost, this can help management understand how much of a unit cost for a product is made up of the raw materials

Question 6

Simple financial measures - Labour rate per hour

Answer 6

If this increases over the year by more than the average wage increases for the industry, management will probably want to know why

Question 7

Simple financial measures - Cost per unit of production

Answer 7

As we have been management often want to attribute costs to cost units and monitor the movements in that cost

Question 8

Areas of performage

Answer 8

• Quality (e.g. of finished goods)
• Wastage of materials
• Efficiency and productivity
• Capacity