Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 11

Performance Reporting: The Use of Standard Cost Variance Information You have been hired recently as the cost accountant for the consumer products division of Zobel Manufacturing Company. The production manager of one of the product lines in this division has expressed concern and dismay over the nature of the periodic reports used to evaluate her performance. In a recent conversation with you she stated: "I feel that the cost accounting reports used to evaluate the financial performance of my product line are misleading and unfair. I have been a line manager for over 15 years and, as such, know how to produce a good product! Because of competitive pressures, our line has even been able to cut raw material costs. It doesn't appear to me that the financial reports we get from accounting reflect these improvements. As well, the reports always contain only negative information-what you guys call cost variances. I am frustrated that the managers above use these reports to evaluate my performance and the performance of my product line." Following is a typical report that is provided to the line manager in question:

Required Identify and discuss at least three changes to the monthly performance report that would make the information in the report more informative and less threatening to the operating managers.