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Performance evaluation: standard vs. actual practices

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It is important to have performance measures to evaluate managers as they control resources and invest in assets for the company. Describe how you could use different variances (actual to standard) to evaluate performance. Additionally, there are non-financial performance measures that can be used. Are there any that you think would be more or less important to a manufacturing company or a service company? Can you provide an example of a personal spending variance that you have experienced?

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Describe how you could use different variances (actual to standard) to evaluate performance.

In order to understand the important of performance measures to evaluate managers as they control resources and invest in assets for the company, we need to understand the different variances to evaluate performance. One of the variances is standard costing, which is the method of cost control that includes a measure of actual performance and measure of the difference, or variance, between standard and actual performance. The estimate of costs is based on analysis of both past and projected operating costs and conditions. It provides a predetermined performance level for the standard costing method. It is in term of cost per unit. It is based on past costs, engineering estimates, forecasting demand, worker inputs, and type and quality of direct materials.
Standard costing is different from actual costing methods in that ...

Solution Summary

As discussed in this module, it is important to have performance measures to evaluate managers as they control resources and invest in assets for the company. Describe how you could use different variances (actual to standard) to evaluate performance.

In order to understand the important of performance measures to evaluate managers as they control resources and invest in assets for the company, we need to understand the different variances to evaluate performance. One of the variances is standard costing, which is the method of cost control that includes a measure of actual performance and measure of the difference, or variance, between standard and actual performance.

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Discuss: Managerial Accounting Practices

Scenario: You were recently hired as a management accountant for a medium-size manufacturing firm. From your interview, you remember that the CEO does not have a lot of knowledge in the management accounting area and was convinced to hire you only after getting some stern warnings from his board of directors. The company has been plagued by continued issues with below-target profitability, selling prices that seem out-of-sync with the firm's competitors, and a lack of any kind of responsibility for adverse budget performance.

Managerial Accounting Practices:
Task Name: Phase 1 Individual Project
Deliverable Length: 5 paragraphs ]
Details: During your first week on the job, the CEO asked you to prepare a report of the kinds of activities you will be involved in to specifically help him better monitor and control the company's financial performance. As he has some background in financial accounting, and how to analyze financial statements, he asked you to contrast financial accounting with management accounting.

Prepare a report that:
- compares and contrasts management and financial accounting along at least 4 different criteria.
- discusses how management accounting could specifically help the CEO control the company's performance.
- recommends how you would establish responsibility centers in the company so that specific managers can be held responsible for specific budget vs. actual spending performance.
- at least 3 internal measures of company's performance that, if put in place, would allow the CEO to better monitor the company's performance.
-explains how each of these 3 internal performance measures could be linked to the kinds of metrics or ratios that external users of accounting information would be reviewing.

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