Ayoko Na
Chapter 16
Operational Performance Measurement: Further Analysis of Productivity and Sales
Cases
16-1 Dallas Consulting Group
Readings
16-1: “Profit Variance Analysis: A Strategic Focus” by Vijay Govindarajan, John K. Shank, Issues in Accounting Education (Fall 1989).
This article uses a fictitious case to demonstrate how variance analysis can be tied explicitly to the strategies of the firm. It expands the Shank and Churchill framework (explained in the article) for variance analysis to include explicitly the strategy and the competitive position of the firm in the analysis and interpretation of results.
Discussion Questions:
1. Why is it inadequate and may even be misleading to rely only on the analysis reported in Table 3?
2. Does a favorable variance imply favorable performance?
3. Table 4 shows a rather elaborate and detailed analysis of variances of operating results. The analysis provides us information on the effect of variations of relevant operating factors on the operating result. The analysis includes relevant and important operating factors such as total market size, market share of the firm, sales mix, selling price, and costs. The analysis considers almost all, if not all, the factors that are of interest and important to management. Why is the analysis incomplete?
16-2: “Examining the Relationships in Productivity Accounting” by Anthony J. Hayzen, James M. Reeve, Management Accounting Quarterly (Summer 2000).
Change in profit of a firm or business unit can be analyzed in terms of a change in productivity and a change in price recovery. Change in product quantities and change in resource quantity drive the change in productivity. Change in product prices and change in resource prices drive the change in price recovery. These relationships can be displayed to provide an instant visual analysis of the causes of profit change. Such visualization can provide a robust method for analyzing strategy and stakeholder
Operational Performance Measurement: Further Analysis of Productivity and Sales
Cases
16-1 Dallas Consulting Group
Readings
16-1: “Profit Variance Analysis: A Strategic Focus” by Vijay Govindarajan, John K. Shank, Issues in Accounting Education (Fall 1989).
This article uses a fictitious case to demonstrate how variance analysis can be tied explicitly to the strategies of the firm. It expands the Shank and Churchill framework (explained in the article) for variance analysis to include explicitly the strategy and the competitive position of the firm in the analysis and interpretation of results.
Discussion Questions:
1. Why is it inadequate and may even be misleading to rely only on the analysis reported in Table 3?
2. Does a favorable variance imply favorable performance?
3. Table 4 shows a rather elaborate and detailed analysis of variances of operating results. The analysis provides us information on the effect of variations of relevant operating factors on the operating result. The analysis includes relevant and important operating factors such as total market size, market share of the firm, sales mix, selling price, and costs. The analysis considers almost all, if not all, the factors that are of interest and important to management. Why is the analysis incomplete?
16-2: “Examining the Relationships in Productivity Accounting” by Anthony J. Hayzen, James M. Reeve, Management Accounting Quarterly (Summer 2000).
Change in profit of a firm or business unit can be analyzed in terms of a change in productivity and a change in price recovery. Change in product quantities and change in resource quantity drive the change in productivity. Change in product prices and change in resource prices drive the change in price recovery. These relationships can be displayed to provide an instant visual analysis of the causes of profit change. Such visualization can provide a robust method for analyzing strategy and stakeholder
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