Financial Performance Management

Financial Performance
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
(a) Calculate cost per unit on basis of labour hours....................................................................1
(b) Calculate cost per unit on basis of activity based costing approach......................................2
(c) Analysis results on basis of labour hours and activity based costing approach....................4
(d) Sensitivity analysis help managers to cope with uncertainties..............................................5
QUESTION 2...................................................................................................................................6
(a) Calculation of variances........................................................................................................6
(b) Problems with current system of calculating and reporting variances..................................7
QUESTION 3...................................................................................................................................8
Critically discussed neither ZBB nor the IB provides the perfect toll for planning coordination
and control...................................................................................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial performance management is a continuous cycle of business and essential at
every step for growth & success. It is a subjective measurement that conduct by the every
organisation to effective run their business activities in proper manner. The management use this
term to measure overall efficiency and financial health in specified period of time. There are
various ways to analysis the financial performance and should be taken in aggregated. Moreover
analyst and investors wish to look deeper into financial reports and declining debt (Ye, Xiao and
Zhou, 2019). This report based on the calculation of cost as per the method of activity based
costing and absorption costing. In this report consist of apply sensitivity analysis to support
managers and calculate different material variances. Along with analysis the problems with
current system and variances for analysing the performance. At the end of the report, critically
discuss about the ZBB and incremental budgeting for perfect planning.
QUESTION 1
(a) Calculate cost per unit on basis of labour hours
Total Overhead cost
Setup costs 120000
Receiving 30000
Despatch 15000
Machining 65000
230000
Overhead absorption rate:
Lipstick Lip-balm
Lip-
gloss
1

Production Volume 30000 35000 3000
Labour hour per unit 3 2 2
total labour hours 90000 70000 6000
16600
0
Total Overhead rate
230000 /
166000 = 1.3855
Cost per unit:
Lipstick Lip-balm
Lip-
gloss
Sales 22 26 24
Raw material 5 10 10
Labour cost 5 5 5
Overheads rate 4.16 2.77 2.77
Cost 14.16 17.77 17.77
Profit per unit 7.84 8.23 6.23
Units 30000 35000 3000
Profit 235301.20 288012.05 18686.75
(b) Calculate cost per unit on basis of activity based costing approach
2