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Pertemuan 5 6 CVP Performance Evaluation
Pertemuan 5 6 CVP Performance Evaluation
Pertemuan 5 6 CVP Performance Evaluation
CVP Analysis
(continued)
CVP analysis can be used in:
CVP Analysis
(continued)
The CVP model is as follows:
10-3
CVP Analysis
(continued)
For convenience, the model is commonly shown
in symbolic form:
(p x Q) = F + (v x Q) + N
Where:
Q = units sold
unit selling
p = price
F = total fixed cost
unit variable
v = cost
N = operating profit (before tax)
10-4
CVP Analysis
(continued)
CVP analysis can be used in:
CVP Analysis
(continued)
The CVP model is as follows:
10-6
CVP Analysis
(continued)
For convenience, the model is commonly shown
in symbolic form:
(p x Q) = F + (v x Q) + N
Where:
Q = units sold
unit selling
p = price
F = total fixed cost
unit variable
v = cost
N = operating profit (before tax)
10-7
Unit
Total
cm/p
Breakeven (B/E)
Planning
Determining the breakeven point is the
starting point of many business plans:
Breakeven is the point at which revenues
Equation Method:
Breakeven Example
(continued)
Breakeven Example
(continued)
Breakeven Example
(continued)
Breakeven Example
(continued)
Breakeven Example
(continued)
When price and unit variable cost are not
known, the management accountant uses
the contribution margin ratio = (p-v)/p to
find breakeven in dollars:
9-22
Performance Evaluation
and Control (continued)
Operational control means the evaluation of
Marketing
Marketing
Manageme
nt
nt
Employe
Employe
e
e
1
1
Region
Region
B
B
Employe
Employe
e
e
2
2
Operations
Operations
Manageme
Manageme
nt
nt
Plant
Plant A
A
Employe
Employe
e
e
3
3
Plant
Plant B
B
Employe
Employe
e
e
4
4
Operationa
l Control
Region
Region
A
A
Financial
Financial
Manageme
Manageme
nt
nt
Management
Control
Chief
Chief
Executiv
Executiv
e
e
Management-byObjectives
In a management-by-objectives (MBO)
Management Control
Objectives
Motivate managers to exert a high level of
Achieving Management
Control Objectives
A common mechanism for achieving these
Strategic Performance
Measurement
Strategic performance measurement is a
Strategic Performance
Measurement (continued)
Centralized firms provide more control and the
Types of SBUs
Cost Centers are a firms production or support
Types of SBUs
(continued)
The choice of a profit, cost, or revenue
center depends on the nature of the
production and selling environment in the
firm:
Products that have little need for coordination
Cost Variance
1,200
100
200
300
250
400
Cost behavior in
administrative
support centers
is often a
step cost
Cost Driver
(number of
applications)
10-35
Revenue
Centers
Management commonly uses revenue drivers
Marketing
Departments
Marketing departments can be either a
revenue or a cost Center:
The revenue center responsibility stems from the
Profit Centers
The profit center managers goal is to earn
profits
Three strategic issues cause firms to
Cost Center
Cost
Leadership
Strategy
Warehouse
Manufacturing
Plant
Profit
Center
Sales
Revenue Center
Sales
Differentiatio
n Strategy
Profit
Center
Investment Centers
Many firms use profit centers (Chapter 18)
Measures of Financial
Performance: Investment
Centers
Alternative measures for evaluating
the financial performance of
investment centers:
Return on investment (ROI)
Residual income (RI)
Economic value added (EVA)
Return on Investment
(ROI)
ROI is the most common measure of
10-43
Easily
Easily understood
understood by
by
managers
managers
Comparable
Comparable to
to interest
interest
rates
rates and
and the
the rates
rates of
of
return
return on
on alternative
alternative
investments
investments
Widely
Widely used
used and
and
reported
reported in
in the
the
business
business press
press
Limitations
Goal
Goal congruency
congruency issue:
issue:
incentive
incentive for
for high
high ROI
ROI
units
units to
to invest
invest in
in
projects
projects with
with ROI
ROI higher
higher
than
than the
the minimum
minimum rate
rate
of
of return
return but
but lower
lower than
than
the
the units
units current
current ROI
ROI
Comparability
Comparability across
across
investment
investment centers
centers can
can
be
be problematic
problematic
10-44
10-46
10-47
Selected Advantages
and
Limitations of RI
Advantages
Limitations
Supports
Supports incentive
incentive to
to
accept
accept all
all projects
projects with
with
ROI
ROI >> minimum
minimum rate
rate of
of
return
return
Can
Can use
use the
the minimum
minimum
rate
rate of
of return
return to
to adjust
adjust
for
for differences
differences in
in risk
risk
Can
Can use
use aa different
different
minimum
minimum rate
rate of
of return
return
for
for different
different types
types of
of
assets
assets
Favors
Favors large
large units
units when
when
the
the minimum
minimum rate
rate of
of
return
return is
is low
low
Not
Not as
as intuitive
intuitive as
as ROI
ROI
May
May be
be difficult
difficult to
to
obtain
obtain aa minimum
minimum rate
rate
of
of return
return at
at the
the subunit
subunit
level
level
10-48
& Co.