Principles of Managerial Accounting · free preview
Using Budgets to Evaluate Goals and Performance
Budgets anchor performance evaluation through variance analysis, key performance indicators, and incentive design, and the evaluation system must separate controllable from uncontrollable factors to motivate honest effort.
1. The evaluation connection
The evaluation connection
2. Variance thresholds and management by exception
Variance thresholds and management by exception
3. Scorecards and KPIs
Scorecards and KPIs
4. Incentive design and its traps
Incentive design and its traps
5. Controllable principle
Why must performance evaluation separate controllable from uncontrollable factors?
6. Management by exception
What does management by exception mean in variance analysis?
7. Scorecard balance purpose
Why does the balanced scorecard pair financial KPIs with customer, process, and learning metrics?
8. Incentive gaming example
Which behavior is an example of incentive gaming against a budget target?
9. Exception threshold term
The size boundary that triggers variance investigation is called the ____ threshold. One word.
10. Lagging indicators
Financial results are lagging indicators, while operational drivers are ____ indicators that precede them. One word.
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