What is idea behind Planning & Operating Variances?
To separate out variances due to uncontrollable factors (planning) and those that are controllable (operating)
What is Planning Variance?
It compares revised and original budgets (e.g Staff sickness - uncontrollable)
What is operating variance?
It compares ACTUALS with the revised budget. (e.g machine breakdown - should have checks in place for maintenance)
Benefits of KPI Dashboard?
-Data Visualisation (allows large volume to be displayed in appealing format)
-Use of graphics is user friendly and intuitive
-Clear and Informative (clear understanding of performance)
-Easy to recognise patterns of data and possible growth opportunities
Variances arise between standards and Actuals because of 2 things?
-controllable operational factors (e.g replacing low skilled with high skilled workers)
-uncontrollable Planning Factors- unrelated to decisions made by senior managers (e.g legislation change, social factors, weather)
What is Responsibility accounting?
- Individual managers responsible for achieving targets
What is the purpose behind Responsibility Accounting?
The accounting system is managers performance evaluated only on areas that they are able to control
