Professional Documents
Culture Documents
Control is taking measures that synchronize outcomes as closely as possible with plans Traditionally, has been almost completely based on financial performance Hence, top internal accounting officer became the In Charge official for organization control policies and procedures What do we call the chief accounting officer of an organization? Answer: The Controller
Financial Information was primary source Rewarded Efficiency Encouraged Dysfunctional Behavior
Strategic Control
What is Measured?
Who is evaluated?
Traditional
Individuals
Functions Responsibility Centers Individuals Teams (Groups) Cross-Functional People
Efficiency
Profits ROI
Internal
Internal
Capacity Management
Capacity is the potential or capability, of a set of resources to do
work of
Importance of capacity management (control) of organizations Huge initial outlays Sunk costs Inflexible
Long-run costs
Mostly Fixed Costs Goal of capacity management is to manage fixed costs (plant assets) in a manner that spreads costs over the largest possible volume A very difficult area of management because it involves long-range planning
*If there is excess capacity fixed costs must be spread over fewer units thereby making the units cost more *If there is insufficient capacity the company must incur additional costs to generate more capacity
Company A
Selling Price $20.00 Direct Mat. $2.00 Direct Labor $1.00 Var. Overhead $1.00
Company B
$20.00 $2.00 $6.00 $1.00
Required: Compute the gross margins on the product of each company. Assume an annual volume of production and sales of 100,000 units; then 200,000 units.
Solution:
(100,000 Units) Cost: Variable Costs/Unit Fixed Cost/Unit Total Cost/Unit $4.00 15.00 $19.00 $9.00 6.00 $15.00 Company A Company B
Selling Price
Total Gross Margin (200,000 Units) The only Change is Fixed costs per unit Total Gross Margin
$20.00
$100,000
$20.00
$500,000
$7.50 $1,700,000
$3.00 $1,600,000
Cost-Volume-Profit Analysis
Revenue Line
Contribution Margin
Activity Level