Performance Evaluation and Control Flashcards
Budget constraint
Performance measured on ability to meet budget
Profit conscious
Performance measured on effectiveness of operations
Non-accounting
Non-financial focus e.g. feedback from colleagues on performance
Return on Investment (RoI)
100% x Controllable divisional profit/divisional capital employed
(same as return on capital employed)
Residual Income
Controllable profit - Interest charged on investment
Fixed budget
Master budget prepared at the beginning of the budget period and uses estimated output and sales volume
Flexible budget
Recognises different cost behaviour patterns and is designed to change as the volume of activity changes
Budget cost allowance
Budget fixed cost + (variable cost per unit x number of units)
Standard costing
comparing actual costs to pre-set standards
Variance analysis
Evaluation of performance through variances
Material variance
Price variance
Usage variance
Labour variance
Rate variance
Efficiency variance
Variable overhead variance
Rate variance
Efficiency variance
Fixed overhead expenditure variance
Budgeted fixed vs actual fixed
Sales variance
Price variance Volume variance (change in units x standard contribution per unit)
