Month: February 2021

MISSION STATEMENTS AND VISION Vision is oriented towards the future, to give a sense of direction to the organisation. Mission describes an organisation’s basic purpose, what it is trying to accomplish. Underlying the behaviour and management processes of most organisations Read More …

VALUE-BASED MANAGEMENT APPROACHES The following explanation of value-based management is based on an article in the McKinsey quarterly 1994, adapted from a book Valuation: Measuring and Managing the Value of Companies, Second edition by Tom Copeland, Tim Koller and Jack Read More …

DIVISIONAL STRUCTURE AND PERFORMANCE MEASURES In this section we look at three performance measures relevant in a divisionalised structure. These are Return on Investment, Residual Income and Economic Value Added . Return on Investment (ROI) and Residual Income (RI) were Read More …

PLANNING AND OPERATIONAL VARIANCES        A planning and operational approach to variance analysis divides the total variance into those variances which have arisen because of inaccurate planning or faulty standards (planning variances) and those variances which have been caused Read More …

BASIC VARIANCES Knowledge brought forward from earlier studies A variance is the difference between an actual result and an expected result. Variance analysis is the process by which the total difference between standard and actual results is analysed. When actual Read More …

THE USE OF STANDARD COSTS A standard cost is an estimated unit cost built up of standards for each cost element (standard resource price and standard resource usage). Standard costing is principally used to value inventories and cost production and Read More …

ANALYSING FIXED AND VARIABLE COSTS Two important quantitative methods the management accountant can use to analyse fixed and variable cost elements from total cost data are the high-low and regression methods.               The high-low method You will have encountered the Read More …

TRADITIONAL BUDGETARY SYSTEMS A budget is a quantified plan of action for a forthcoming accounting period. A budget can be set from the top down (imposed budget) or from the bottom up (participatory budget). Budget preparation You will have covered Read More …

OBJECTIVES Corporate objectives concern the firm as a whole. Unit objectives are specific to individual units, divisions or functions of an organisation. Corporate objectives are set as part of the corporate planning process which is concerned with the selection of Read More …

RISK AND UNCERTAINTY An example of a risky situation is one in which we can say that there is a 70% probability that returns from a project will be in excess of RWF100 million but a 30% probability that returns Read More …