Performance Evaluation.ppt

Performance Evaluation Chapter 8 Preparing Flexible Budgets Static budgetsare prepared for asingle, planned levelof activity. Performance evaluation is difficult when actual activity differs from the planned level of activity. Preparing Flexible Budgets Preparing Flexible Budgets Preparing Flexible Budgets Preparing Flexible Budgets Preparing Flexible Budgets Preparing Flexible Budgets Preparing Flexible Budgets Central Concept If you can tell me what your activity wasfor the period, I will tell you what your costs and revenue should have been. Preparing Flexible Budgets To a budget for different activitylevels, we must know how costs behave with changes in activity levels. Total variable costschange in directproportion to changes in activity. Total fixed costsremain unchangedwithin the relevantrange. Preparing Flexible Budgets Preparing Flexible Budgets Preparing Flexible Budgets Preparing Flexible Budgets Sales and Cost Variances Sales and Cost Variances Standard Costs Establishing Standards Establishing Standards Accountants, engineers, personnel administrators, and production managers combine efforts to set standards based on experience and expectations. Establishing Standards Establishing Standards Need for Standards Selecting Variances to Investigate Manufacturing Cost Variances Manufacturing Cost Variances Manufacturing Cost Variances Price and Usage Variances Price and Usage Variances Price and Usage Variances Price and Usage Variances Calculating the Materials Priceand Usage Variances Calculating the Materials Priceand Usage Variances Hanson Inc. has the following material standards to manufacture one Zippy: 1.5 kilograms per Zippy at $4.00 per kilogram Last week 1,700 kilograms of material were purchased and used to make 1,000 Zippies. The material cost a total of $6,630. Calculating the Materials Priceand Usage Variances What is the actual price per kilogrampaid for the material? a. $4.00 per kilogr