The Variances Discussed in Chapter 15 (For Manufacturing Overhead) Are

Essay

The variances discussed in Chapter 15 (for manufacturing overhead) are all components of a short-term financial control system. These variances are calculated using standard manufacturing costs and flexible budgets. As was argued in the text (both in Chapter 15 and elsewhere) a financial control system is but part of a more comprehensive management accounting and control system.

Required:
1. What are the primary limitations of short-run financial control measures?
2. How can a short-run financial control system be expanded to become a more comprehensive management accounting and control system? Discuss, in at least some detail, how and why you would expand the system to provide management with more useful information.