Preview

Importance of nonfinancial measures

Good Essays
Open Document
Open Document
585 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Importance of nonfinancial measures
Importance of nonfinancial measures offer four advantages based on financial date. First, the long term organization strategies they do not deal with profitability, competitive, strength and longer term strategic goals. They only do their job of new product development and expand organizational capabilities which are important for strategic goals. Second, intangible assets which is intellectual capital and customer loyalty of company rather than balance sheet. Third non financial measures help us to predict and see future financial performance. Such is investment in research development or customer satisfaction program will make more profit and bring more satisfied customers. Fourth, management actions and level of noise change those are beyond the control of managers or organizations. Managers have to watch company’s success and failing that way the need to maximize their effect on their performance. Measurement gaps is that customer related performance is a long term strategy and it was more successful than short term financial performance according to survey of 148 U.S financial service company. Non-financial measure is important in decision making and performance evaluation. Companies should know that measuring is a dynamic process. Measure might be good today but it should be keep reassessed and involve competitive environment.

Reference https://knowledge.wharton.upenn.edu/article/non-financial-performance-measures-what-works-and-what-doesnt/ 1 How do managers plan for variable overhead costs?
Managers plan for variable overhead changes with the level of activity, so if managers think they are overspending on variable overhead, managers are able to slow or stop the production process and investigate. If some reason a company needs to increase production, managers have to check and add variable overhead as needed.
1. How does the planning of fixed overhead cost differ from the planning of variable costs?
Fixed overhead costs involve

You May Also Find These Documents Helpful

  • Good Essays

    This quote is often ascribed to Peter Drucker, a management guru. In a company for smooth running of its business everything must be measured, it can be financial or non financial. Since not only financial measures influence resulting figures but also non financial figure contribute a lot. Areas of financial performance measurements are Profitability, Risk Involved, liquidity of available funds and financial efficiency and performance of the company. Under non financial performance measurement employee satisfaction, customer loyalty and the level of product innovation aspects will come. Financial and other measures are correlated. Contemplation of both non financial factors and financial factors of measurement can give a clear picture of the company; it will be helpful in taking an appropriate decision. Factors like innovation has to play a vital role in decision making as it decides future market of a products, change is the fashion of the day. Customer loyalty must be measure in order to decide on output volume whereby both the aspect are considered and chance of losses can be reduced. These two measures are similar two tires of a motor cycle, whereby if one tire gets punctured vehicle can run for a small distance but in long run we can’t run. Company can manage its operations without measuring non financial measures for a short run but on a long run those matter a lot. No company focus to live for a short run due to the nature of business returns. Returns can’t be got in short run due return on investments it will take years to come.…

    • 831 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    2. (a) What is the distinction between marginal cost and incremental cost? (b) How are sunk costs treated in managerial decision making? Why?…

    • 2075 Words
    • 8 Pages
    Powerful Essays
  • Good Essays

    Other costs that the company must consider before expanding include fixed and variable costs that make up the total cost of production for a company. Fixed costs are costs that cannot be avoided by the company. Even if the company stops production, it will still be incurring costs like rent of the place or the electricity bill of the factory which will be incurred no matter what happens. Such costs cannot be eliminated but can be reduced by means of increase in production. With an increase in production, the fixed cost gets divided on per unit produced. Variable costs on the other hand can be increased or decreased accordingly.…

    • 1151 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Bridgeton Case

    • 963 Words
    • 4 Pages

    i. Overhead costs were entirely fixed costs (regardless of the level of production or the number of product lines)?…

    • 963 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    2510 Midterm

    • 2958 Words
    • 12 Pages

    In the preparation of financial statements using variable costing, fixed manufacturing overhead is treated as a period cost. A) True B) False 2.…

    • 2958 Words
    • 12 Pages
    Powerful Essays
  • Good Essays

    Costs can be classified to be as either being fixed or variable. Fixed costs comprise of normally overheads while variable costs vary with the amount of activity or…

    • 514 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Microeconomics Quiz Review

    • 2090 Words
    • 9 Pages

    5. Assuming a firm’s costs are split between variable costs and fixed costs, once variable costs are covered,…

    • 2090 Words
    • 9 Pages
    Good Essays
  • Satisfactory Essays

    First of all, the relationship between fixed and variable costs. Both are decreased, because the…

    • 499 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Wriston Manufacturing

    • 1022 Words
    • 5 Pages

    On the other hand, the factors contributing to the variance in variable overhead costs include (a) different product mixes and output volumes between plants, (b) the production processes utilized by plants, (c) absenteeism/turnover rates, (d) setup costs, and (e) the transfer of products and employees between plants. The case states that “[t]he complexity of the product missions assigned to each plant was, in fact, quite different” and the Detroit plant specifically had “been left with a residue of…

    • 1022 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    Profits reported under variable and absorption costing will differ when inventory increases or decreases during the year. The difference involves the timing with which fixed manufacturing overhead becomes an expense. Under variable costing, fixed overhead is expensed immediately as it is incurred. Under absorption costing, fixed overhead is inventoried until the manufactured goods are sold.…

    • 590 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Solutions Chapter 19

    • 3361 Words
    • 14 Pages

    No, companies should emphasize financial as well as nonfinancial measures of quality, such as yield and defect rates. Nonfinancial measures are not directly linked to bottom-line performance but they indicate and direct attention to the specific areas that need improvement to improve the bottom line. Tracking nonfinancial measures over…

    • 3361 Words
    • 14 Pages
    Good Essays
  • Good Essays

    Practice Exam

    • 4476 Words
    • 18 Pages

    A company's static budget estimate of total overhead costs was $805,000 based on the assumption that 23,000 units would be produced and sold. The company estimates that 20% of its overhead is variable and the remainder is fixed. The total overhead cost according to the flexible budget if 27,000 units were produced and sold is (Do not round intermediate calculations.):…

    • 4476 Words
    • 18 Pages
    Good Essays
  • Satisfactory Essays

    Assignment 1

    • 356 Words
    • 2 Pages

    a) What role does the choice of capacity level impact income reported under variable costing? Be specific!…

    • 356 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Considering the situation of our company, the cost driver of different overhead costs is different…

    • 644 Words
    • 3 Pages
    Good Essays
  • Good Essays

    locked-in than is the case with variable overhead costs. When planning fixed overhead costs, a…

    • 11406 Words
    • 132 Pages
    Good Essays