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Lecture Accounting: What the numbers mean (10/e): Chapter 15 - Marshall, McManus, Viele

Chapter 15 - Cost control. After reading this chapter, you should be able to answer the following questions: Why are all costs controllable by someone at some time, but in the short run some costs may be classified as noncontrollable? How does performance reporting facilitate the management-by-exception process? How can the operating results of segments of an organization be reported most meaningfully?. | © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Accounting: What The Numbers Mean Tenth Edition Marshall, McManus, and Viele Chapter 15 Cost Control PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Chapter 15: Cost Control Activity Budget Amount Actual Amount Explanation — = Favorable Actual revenues > Budgeted revenues Actual costs Budgeted costs Variance LO 2 Performance Report Characteristics 15- Learning Objective 2: Discuss how performance reporting facilitates the management by exception process. A variance for an activity equals the budgeted amount less the actual amount. Favorable variances occur when the actual revenues are greater than budgeted revenues, and actual costs are less than budgeted costs. Unfavorable variances occur when actual revenues are less than budgeted revenues and actual costs are greater than budgeted costs. The vice president of operations receives summarized information from each store. Management by exception: Upper-level management does not receive operating detail unless activities are not performing according to plan. LO 2 Performance Report Characteristics Responsibility Reporting Amount of detail varies according to level in the organization. 15- With management by exception, upper-level management does not receive operating detail unless activities are not performing according to plan, and the vice president of operations receives summarized information from each store. Improve performance evaluation. May be prepared for any activity level within the relevant range. Show revenues and expenses that should have occurred at the actual activity. Reveal variances due to effective cost control or lack of cost control. LO 3 The Flexible Budget 15- Learning Objective 3: Construct a flexible budget and describe how it is used. | © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Accounting: What The Numbers Mean Tenth Edition Marshall, McManus, and Viele Chapter 15 Cost Control PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Chapter 15: Cost Control Activity Budget Amount Actual Amount Explanation — = Favorable Actual revenues > Budgeted revenues Actual costs Budgeted costs Variance LO 2 Performance Report Characteristics 15- Learning Objective 2: Discuss how performance reporting facilitates the management by exception process. A variance for an activity equals the budgeted amount less the actual amount. Favorable variances occur when the actual revenues are greater than budgeted revenues, and actual costs are less than budgeted costs. Unfavorable variances occur when actual revenues are less than budgeted .