Explain the Three Shareholder Metrics Used in Market-Based Management

question 49

Essay

Explain the three shareholder metrics used in market-based management.

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Definitions:

Direct Materials Price Variance

The difference between the actual cost of direct materials used in production and the standard cost, multiplied by the actual quantity of materials used.

Flexible Budget

A flexible budget adjusts expenses based on changes in actual revenue or other activities, allowing for more accurate budgeting and variance analysis.

Variable Costs

Expenses that vary in direct proportion to changes in activity levels or volumes, such as raw materials and direct labor costs.

Fixed Costs

Costs that remain constant in total regardless of changes in the activity level within a relevant range.