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Operational Performance Measurement

In: Business and Management

Submitted By Ghini
Words 28719
Pages 115
Chapter 15

Operational Performance Measurement: Indirect-Cost Variances and Resource- Capacity Management

Cases

15-1 Berkshire Toy Company (Source: Dean Crawford and Eleanor G. Henry, “Budgeting and Performance Evaluation at the Berkshire Toy Company,” Issues in Accounting Education, 15 (2) (May 2000), pp. 283-309.)

15-2 The Mesa Corporation (Source: Robert Capettini, C. W. Chow, and J. E. Williamson, “Instructional case: the Proper Use of Feedback Information,” Issues in Accounting Education, 7 (1) (Spring 1992) pp. 48-56.)

Readings

15-1: “Using Enhanced Cost Models in Variance Analysis for Better Control and Decision Making,” by Kennard T. Wing, Management Accounting Quarterly (Winter 2000), pp. 1-9.

This article points out that oversimplifications of fixed and variable costs can result in the standard costing system not being used or, if used, can lead to bad decisions. That is, misclassifications of cost behavior patterns make variance analyses “paper tigers.” For variance reporting to be useful, financial managers need to develop cost models that reflect how costs actually behave.

Discussion Questions:

1. Describe the implications for variance analysis of analyzing a semi-variable cost as either a variable or fixed cost.
2. Describe the implications for variance analysis of analyzing a step-fixed cost as either a variable or fixed cost.
3. Describe the implications on operating decisions of analyzing an operation with mixed costs as either a variable or fixed cost.

15-2: “Variance Analysis Refines Overhead Cost Control,” by J. C. Cooper and J. D. Suver, Healthcare Financial Management (February 1992).

This article attempts to analyze the full costs of selected medical procedures using examples from a healthcare organization. A key feature of the analysis is how the overhead variances are handled, and in...

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