Topic 5 - Evaluating Strategic Profit Performance (Variance Analysis)

Question 1

Has the activity achieved the desired outcome?

Answer 1

Effectiveness

Question 2

How many resources has been used to receive the level of outcome?

Answer 2

Efficiency

Question 3

Formula Strategic profitability

Answer 3

Strategic profitability =
Proift (or loss) from competitive effectiveness +
Profit (or loss) from operating efficiencies

Question 4

Increase or decrease in profit due to either changes in market size or in market share.

Answer 4

Market share variance

Question 5

Increase or decrease in profit due to changes in price or due to changes in product mix.

Answer 5

Revenue variances

Question 6

Difference between budget and actual sales volume.

Answer 6

Efficiency variance

Question 7

Changes in the unit cost of production inputs

Answer 7

Spending variance

Question 8

Spending variance for service companies

Answer 8

Spending variance = Planned cost - Actual cost

Question 9

Production spending variance

Answer 9

Production spending variance = Actual units of output x Actual volume of inputs per unit of output x (planned cost of one unit of input - Actual cost of one unit of input)