The Variances Discussed in Chapter 15 (For Manufacturing Overhead)are All

question 74

Essay

The variances discussed in Chapter 15 (for manufacturing overhead)are all components of a short- term financial control system.These variances are calculated using standard manufacturing costs and flexible budgets.As was argued in the text (both in Chapter 15 and elsewhere)a financial control system is but part of a more comprehensive management accounting and control system.
Required: (a)What are the primary limitations of short-run financial control measures?
(b)How can a short-run financial control system be expanded to become a more comprehensive management accounting and control system? Discuss,in at least some detail,how and why you would expand the system in an attempt to provide management with more useful information.
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Definitions:

Market Price

The present value at which a good or service may be purchased or sold in a market.

Option Clearing Corporation

An organization that facilitates the clearing and settlement of options contracts, ensuring their performance.

Stock Options

Contracts that grant the holder the right, but not the obligation, to buy or sell a stock at a specified price before a specified date.

Break-Even Price

The price level at which an investment must reach for an investor to recover their initial investment without making a profit or incurring a loss.