Why Is It Important That a Manager's Evaluation Be Based

question 43

Essay

Why is it important that a manager's evaluation be based only on those revenues and costs that he or she can control?

Understand the process and significance of preparing a production budget.

Grasp the concept of budgeted cash collections and their calculation.

Comprehend the preparation and importance of a direct materials purchases budget.

Understand how to prepare and analyze a sales budget.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production of goods, such as utilities, maintenance, and manager salaries.

Committed Fixed Costs

Investments in facilities, equipment, and basic organizational structure that can’t be significantly reduced even for short periods of time without making fundamental changes.

Short Run

A period in economics during which the quantities of some inputs cannot be changed, limiting the capacity to adjust production levels.

Step-Variable Cost

Refers to a cost that remains fixed for a certain level of production or activity, but can increase in a step manner when a certain threshold is exceeded.