As Was the Case with the Material Presented in Text

question 91

Essay

As was the case with the material presented in text Chapter 14, the cost variances covered in Chapter 15 are directed at what might be called short-term financial control. These variances are calculated based on standard costs and the use of flexible budgets. Periodic reports containing these variances are but a part of a larger and more comprehensive management accounting and control system.

Required:
1. Explain some of the inherent limitations of short-term financial performance measures (such as standard cost variances).
2. Explain how such measures might be supplemented to better meet the planning and control needs of management.

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Definitions:

Qualitative Methods

Research techniques that collect non-numeric data to understand concepts, thoughts, or experiences.

Simulations

The use of models or virtual environments to replicate or mimic real-life processes, scenarios, or environments for training, analysis, or prediction purposes.

Scenarios

Detailed, imagined situations used for strategic planning, decision making, or predicting outcomes of various action plans.

HR Budgets

Quantitative, operational, or short-run demand estimates that contain the number and types of jobs required by the organization as a whole and for each subunit, division, or department.