Acct1014 Management Accounting Systems

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ACCT1014 Management Accounting Systems
Topic 3 (Part II): Performance Measurement and Reward Systems

Lecture Illustration

Brookline Ceramics manufactures a range of ceramic products for the home and office. The Pot Division manufactures a range of ceramic pots, which it sells primarily to plant nurseries. Allin Habib is the manager of the Pot Division, which is treated as a profit centre for performance purposes. Allin is able to earn a significant bonus if she meets her performance targets each quarter.

Below are four separate lists of performance measures (and targets) which Brookline Ceramics could possibly use to evaluate Allin’s performance.

List A

|Performance Measure |Target |Performance Measure Attribute | |Divisional controllable costs |All costs within 5% of budget | | |Divisional sales revenue |Meet or exceed budget | | |Divisional profit |Meet or exceed budget | |

Means of Competitive Advantage__________________________________________________

List B

|Performance Measure |Target |Performance Measure Attribute | |Divisional controllable costs |All costs within 5% of budget | | |Divisional sales revenue |Meet or exceed budget | | |Divisional profit |Meet or exceed budget | | |Ave. daily labour productivity ratio* |Exceeds 2 | | |Ave. weekly input productivity ratio* |Exceeds 0.10 | | |Defect rates |Less than 5 defective units per 1,000 | |

*Labour productivity ratio = number of units produced/direct labour hours
Input productivity ratio = number of units produced/cost of all inputs

Means of Competitive Advantage__________________________________________________ List C

|Performance Measure |Target |Performance Measure Attribute | |Divisional controllable costs |All costs within 10% of budget | | |Divisional sales revenue |Meet or exceed budget | | |Divisional profit |Meet or exceed budget | | |Delivery in full and on time |Target 98% | | |Defect rates |Less than 5 defective units per 1,000 | | |Customer complaints |Less than 25 per quarter | | |Customer satisfaction survey |Minimum average score on customer service questions of 4.5 | |

Means of Competitive Advantage__________________________________________________

List D

|Performance...
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