Question No 24:
Explain why non-financial performance measures are important in the service sector?
The modern service sector is extremely competitive and as a consequence if a business is to succeed it needs to ensure that it is both efficient and that is satisfies the needs of its guests. Financial performance is important but this is described as a "lagging measure" in that it reports on what has happened. Failing to meet targets can mean that profits are not achieved and that inadequate current returns are obtained. However, short term action to improve current financial performance might, in the long term, be at the expense of the company's interests. This is why modern thinking suggests that non-financial measures may be more appropriate in assessing performance. Non-financial "leading" measures indicate how well the company is doing things that can lead to future profits.
Thursday 27 August 2015
Cima P2 Exam Questions 25
Question No 25:
Explain why non-financial performance measures are important in the service sector.
The modern service sector is extremely competitive and as a consequence if a business is to succeed it needs to ensure that it is both efficient and that is satisfies the needs of its guests. Financial performance is important but this is described as a "lagging measure" in that it reports on what has happened. Failing to meet targets can mean that profits are not achieved and that inadequate current returns are obtained. However, short term action to improve current financial performance might, in the long term, be at the expense of the company's interests. This is why modern thinking suggests that non-financial measures may be more appropriate in assessing performance. Non-financial "leading" measures indicate how well the company is doing things that can lead to future profits.
Explain why non-financial performance measures are important in the service sector.
The modern service sector is extremely competitive and as a consequence if a business is to succeed it needs to ensure that it is both efficient and that is satisfies the needs of its guests. Financial performance is important but this is described as a "lagging measure" in that it reports on what has happened. Failing to meet targets can mean that profits are not achieved and that inadequate current returns are obtained. However, short term action to improve current financial performance might, in the long term, be at the expense of the company's interests. This is why modern thinking suggests that non-financial measures may be more appropriate in assessing performance. Non-financial "leading" measures indicate how well the company is doing things that can lead to future profits.
Thursday 20 August 2015
Cima P2 Exam Questions 23
Question No 23:
Explain, the importance of calculating planning and operational variances for responsibility centers.
The market size is not within the control of the sales manager and therefore variances caused by changes in the market size would be regarded as planning variances. However, variances caused by changes in the selling prices and consequently the selling price variances and market shares would be within the control of the sales manager and treated as operating variances. The market size variance compares the original and revised market sizes. This is unchanged for DVD players so the only variance that occurs relates to the Blu-ray players and is: 500 players x $95 = $47,500 F It is important to make this distinction because as can be seen from the scenario the measurement of the manager's performance is distorted if the revised market size is ignored. The favorable volume variance of $19,000 referred to in the sales manager's e-mail is made up of two elements, one of which, the market size, is a planning variance which is outside their control. It is this that has caused the overall volume variance to be favorable, and thus the manager is not responsible for the overall favorable performance
Explain, the importance of calculating planning and operational variances for responsibility centers.
The market size is not within the control of the sales manager and therefore variances caused by changes in the market size would be regarded as planning variances. However, variances caused by changes in the selling prices and consequently the selling price variances and market shares would be within the control of the sales manager and treated as operating variances. The market size variance compares the original and revised market sizes. This is unchanged for DVD players so the only variance that occurs relates to the Blu-ray players and is: 500 players x $95 = $47,500 F It is important to make this distinction because as can be seen from the scenario the measurement of the manager's performance is distorted if the revised market size is ignored. The favorable volume variance of $19,000 referred to in the sales manager's e-mail is made up of two elements, one of which, the market size, is a planning variance which is outside their control. It is this that has caused the overall volume variance to be favorable, and thus the manager is not responsible for the overall favorable performance
Wednesday 12 August 2015
Cima P2 Exam Questions 22
Question No 22:
What is the differences between Target Costing and Kaizen Costing?
One of differences is that Target Costing applies before production commences whereas Kaizen Costing applies once production has commenced. Another difference is that although both Target Costing and Kaizen Costing involve making changes to improve results, Target Costing looks at making significant changes in order to reduce the expected cost until it reaches the Target Cost necessary to achieve the Target Profit from the given selling price. Kaizen Costing deals with making a number of further small improvements as a result of involving everyone in the process.
What is the differences between Target Costing and Kaizen Costing?
One of differences is that Target Costing applies before production commences whereas Kaizen Costing applies once production has commenced. Another difference is that although both Target Costing and Kaizen Costing involve making changes to improve results, Target Costing looks at making significant changes in order to reduce the expected cost until it reaches the Target Cost necessary to achieve the Target Profit from the given selling price. Kaizen Costing deals with making a number of further small improvements as a result of involving everyone in the process.
Thursday 6 August 2015
Cima P2 Exam Questions 21
Questions No 21:
Explain how JYT could use Kaizen Costing to improve its future performance?
Kaizen Costing is a system that is used once production has commenced. Kaizen means improvement and it is applied by continually striving to improve. However, Kaizen does not look for large significant improvements; instead it is based around making small improvements continuously. It is a group effort in which everyone is involved. It should become part of every employee's daily routine to constantly look for ways to improve the workflow within the organization. Kaizen is based around a continuous circle of Plan, Do, Check, Act. Plan refers to the need to set a target for improvement as without a benchmark success cannot be measured. Do refers to the implementation of the plan. Check is the determination of whether the plan improved the process. Act means standardize the improved procedure so that it can be repeated.
Explain how JYT could use Kaizen Costing to improve its future performance?
Kaizen Costing is a system that is used once production has commenced. Kaizen means improvement and it is applied by continually striving to improve. However, Kaizen does not look for large significant improvements; instead it is based around making small improvements continuously. It is a group effort in which everyone is involved. It should become part of every employee's daily routine to constantly look for ways to improve the workflow within the organization. Kaizen is based around a continuous circle of Plan, Do, Check, Act. Plan refers to the need to set a target for improvement as without a benchmark success cannot be measured. Do refers to the implementation of the plan. Check is the determination of whether the plan improved the process. Act means standardize the improved procedure so that it can be repeated.
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