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Performance evaluation: standard vs. actual practices

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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