Performance Analysis

Question 1

What is idea behind Planning & Operating Variances?

Answer 1

To separate out variances due to uncontrollable factors (planning) and those that are controllable (operating)

Question 2

What is Planning Variance?

Answer 2

It compares revised and original budgets (e.g Staff sickness - uncontrollable)

Question 3

What is operating variance?

Answer 3

It compares ACTUALS with the revised budget. (e.g machine breakdown - should have checks in place for maintenance)

Question 4

Benefits of KPI Dashboard?

Answer 4

-Data Visualisation (allows large volume to be displayed in appealing format)
-Use of graphics is user friendly and intuitive
-Clear and Informative (clear understanding of performance)
-Easy to recognise patterns of data and possible growth opportunities

Question 5

Variances arise between standards and Actuals because of 2 things?

Answer 5

-controllable operational factors (e.g replacing low skilled with high skilled workers)

-uncontrollable Planning Factors- unrelated to decisions made by senior managers (e.g legislation change, social factors, weather)

Question 6

What is Responsibility accounting?

Answer 6

• Individual managers responsible for achieving targets

Question 7

What is the purpose behind Responsibility Accounting?

Answer 7

The accounting system is managers performance evaluated only on areas that they are able to control