Financial vs. Operational Control; Behavioral Considerations in the Standard-SettingProcess You have been assigned to a strategic leadership committee that has been charged bythe CEO with developing and implementing a comprehensive management accounting and controlsystem. At the first planning session that you attended, the subject of financial-control systems arose,but there was some uncertainty regarding the nature of such systems and some of the behavioralconsiderations that might have to be made in the design process. You have been asked by the chair ofthe committee to prepare a short written document that could be used as the basis of discussion at thenext meeting. Specifically, you have been asked to define and distinguish between operational control and financial control and how such systems relate to an organization’s management accountingand control system; explain the theory behind the use of flexible budgets, standard costs, and variance analysis as elements of a financial-control system; and provide input regarding how standards/budgets for performance evaluation should be set (i.e., whether authoritative standards, participativestandards, or perhaps a combination approach should be used in the standard-setting process).Required Compose your response as requested.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Financial vs. Operational Control; Behavioral Considerations in the Standard-Setting
Process You have been assigned to a strategic leadership committee that has been charged by
the CEO with developing and implementing a comprehensive
system. At the first planning session that you attended, the subject of financial-
but there was some uncertainty regarding the nature of such systems and some of the behavioral
considerations that might have to be made in the design process. You have been asked by the chair of
the committee to prepare a short written document that could be used as the basis of discussion at the
next meeting. Specifically, you have been asked to define and distinguish between operational control and financial control and how such systems relate to an organization’s management accounting
and control system; explain the theory behind the use of flexible budgets,
budgets for performance evaluation should be set (i.e., whether authoritative standards, participative
standards, or perhaps a combination approach should be used in the standard-setting process).
Required Compose your response as requested.
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