Core Activity Area D Flashcards
What is responsibility accounting?
A specific manager takes responsibility for a particular aspect of the budget
What are the advantages of responsibility accounting?
Profit centre managers are made aware of the significance of other overhead costs
Profit centre managers are made aware that they need to earn a sufficient profit to cover a fair share of other overhead costs
What are the disadvantages of responsibility accounting?
Profit centre managers are made accountable for a share of other overhead costs, but they can do nothing to control them
The apportionment of other overhead cost between profit centres, like overhead apportionment generally, is usually just a matter of judgement, lacking any economic or commercial justification.
What are the five principles for effective report visualisation of responsibility centres?
Ensure data is optimised for report visualisation
The relevant visualisation tool must be applied
An appropriate report layout must be chosen
The reader experience must be optimised
Visualisation to the appropriate delivery channel must be optimised
What are planning variances?
Compares the revised budget and the original budget
Often deemed to be uncontrollable.
Management should not be held accountable
What are operational variances?
Compares actual results with the revised budget
Deemed Controllable
Management held responsible for operational variances
What are the some NFPI’s for competitiveness?
Sales growth by product or service
Size of customer base
Market share by product, service or customer group
What are the some NFPI’s for activity level?
Number of units sold
Labour and machine hours worked
Number of passengers carried
Number of overdue debts collected
What are the some NFPI’s for productivity?
Manufacturing cost per unit produced
Capacity utilisation of facilities and labour force
Average number of units produced per day or per man-day
Average setting up time for new production run
What are the some NFPI’s for quality of service?
Number of units rejected in manufacturing
Number of units failing in service
Number of visits by representatives to customer premises
Number of new accounts gained or lost
Number of repeat customer orders received
What are the some NFPI’s for customer satisfaction?
Average time taken to respond to customer enquiry or order
Expressed customer satisfaction with sales staff
Expressed customer satisfaction with technical representatives
Number of customer complaints received
What are the some NFPI’s for quality of staff experience?
Days absence per week
Staff turnover rate
Number of new qualifications
Number of new staff skills certified
Expressed job satisfaction
Qualification levels of newly recruited staff
What are the some NFPI’s for innovation?
Number of new products or services brought to market
Proportion of sales relating to new products
Technical lead relative to competitors
Lead time to bring new products to market
What are the 3E’s in the 3Es concept?
Economy - measures relationship between money spent and inputs
Efficiency - measures whether the maximum output is being acheived from the resources used
Effectiveness - measures to what extent the outputs generated achieve the objectives of the organisation
What are the objectives of transfer pricing?
Goal Congruence
Performance management
Maintaining divisional autonomy
Minimising the global tax liability
Recording the movement of goods and services
A fair allocation of profits between division
