Summary ACCA Performance Management, ISBN: 9781509716579 ACCA

PM - Budgeting and control
Contents
Performance Analysis .................................................................................................................. 2
VARIANCE ANALYSIS: ............................................................................................................... 2
STANDARD COSTING: .............................................................................................................. 2
JIT AND TQM: ........................................................................................................................... 3
Performance Analysis in Not-For-Profit Organisations and the Public-Sector ........................... 5
OBJECTIVES .............................................................................................................................. 5
PERFORMANCE MEASUREMENT ............................................................................................. 6
PERFORMANCE INDICATORS ................................................................................................... 6
LONG-TERM VIEW ................................................................................................................... 7
Balanced Scorecard ..................................................................................................................... 8
Performance Measures in the Private Sector and NFP and Public Sector .................................. 9
PERFORMANCE MEASURES ..................................................................................................... 9
FINANCIAL PERFORMANCE MEASURES FOR THE PRIVATE SECTOR...................................... 10
NON-FINANCIAL PERFORMANCE MEASURES FOR THE PRIVATE SECTOR ............................ 14
NOT-FOR-PROFIT ORGANISATIONS AND THE PUBLIC SECTOR ............................................. 15




1

, Performance Analysis
VARIANCE ANALYSIS:

It is crucial to consider variances alongside each other when using them for performance
analysis, as an adverse variance in one area might have also resulted in a favourable variance
elsewhere.

Risk: Appraising management through variance analysis could result in some very demotivated
members of staff and the future performance of the business is likely to suffer.

Solution: By splitting variances into 'uncontrollable' and 'controllable' (planning and
operational), management can then be assessed based on the variances they can control, which
seems fair and should result in a more motivated workforce.

STANDARD COSTING:

Ensuring that the standard cost being used within the initial budget is correct is also crucial to
ensure that:

1) The initial budgets are as accurate as possible;

2) Management is not being assessed against unrealistic targets, costs, and revenues.

If standard costs are to be used to appraise management, we need to ensure that the standards
being set are:

1) Not too high. If they are too high, management will find it difficult to achieve them and
they may be deterred from even trying to achieve them;

2) Not too low. If the standard is too low and is easy to achieve, this is likely to mean that
management will not strive to achieve the best possible results. This can result in staff
and management becoming demotivated;

3) Attainable but challenging. If so, the management and staff can see that they can
achieve the standards, provided they work hard and work to improve the performance
of their department.




2