Effectiveness
Calculating a Volume-Adjusted Volume-Adjusted Profit
Profit Plan (or Flexible Budget)
Variable costs = Input volume x
Cost per unit of input
Efficiency variance
Calculating Production Efficiency
and Cost Variances (If Applicable)
Spending variance
Spending variance =
(Planned cost - Actual cost)
Committed Costs
Calculating Variances
for Nonvariable Costs
Discretionary Expenses
Activity-Based Costs
Searching for Explanations
and Initiating Action Plans
Strategic Learning
Early Warning and
Corrective Action
Performance Evaluation
YUSTIKA ADININGSIH-
F0319141-MINDMAP
2 Measurements
Plan SPM A CHAPTER 6
Efficiency
favorable
Computing Profit Plan Variances
variance analysis
in Absolute and Relative Terms
unfavorable
Operating Efficiencies : profit (loss) from competitive
Variable Costs effectiveness + profit (loss) from
operating efficiencies
Strategic Profitability
Cash Wheel
Strategic Profitability Strategic Profitability
Analysis Wheel Analysis
Evaluating
Strategic Profit ROE Wheel
Operating Efficiencies : Performance
Nonvariable Costs
Market size variance = market size
X planned market share X planned
average contribution margin
Competitive Effectiveness : Computing Market
Market Share Variances Share Variances
Market share variance = market
share X actual market size X planned
Interpreting Strategic
average contribution margin
Profitability Variances
increase (or decrease) in profit
due to changes in prices
increase (or decrease) in profit
due to changes in product mix
Competitive Effectiveness : Computing Revenue
Revenue Variances Variances
price premium
Using Strategic
Profitability Analysis
Contribution margin
product mix
Product mix variance = average standard
product mix variance
contribution x actual unit volume
 Set of formal routines and
procedures designed to process and
evaluate requests to acquire new assets
YUSTIKA ADININGSIH-
F0319141-MINDMAP
SPM A CH 7
Capital budget or capital investment plan

Senior managers must provide guidance

Limits on Asset Allocations to subordinates about what kind of
Evaluating Assets Acquired to Meet assets to acquire
Safety/Health/Regulatory Needs

The analyses
Asset Allocation
Payback Systems
Net Present Value (NPV)
Policies and Procedures The process
Discounted Cash Flow
Evaluating Assets to Enhance Operating
Weighted Average Cost of
Efficiency and/or Increase Revenue A time frame
Capital (WACC)

Hurdle Rate Internal Rate of Return Evaluating Asset Senior managers should
Acquisition Proposals communicate policies regarding who
Span of Accountability
Designing Asset has authority to approve the
Alignment of Proposal with Existing acquisition of assets
Allocation Systems
Strategy and/or Distinctive Capabilities

Spending Limits Limiting discretion

Risks in Acquiring the Asset

Assets to Meet Safety/Health/

Risk in Deciding Not to Regulatory Needs
Acquire the Asset
Evaluating Assets to be Acquired for
Competitive Effectiveness Sorting Asset by Assets to Enhance Operating
Quality of Information Category Efficiency and/or Increase Revenue
Supporting Proposal

Assets to Enhance Competitive

Track Record and Ability of Champion Effectiveness

Feasibility and Cost of

Reversing Decision

The Process of
Putting It All Together
Allocating Assets