Performance Management Cost & Management Accounting

Performance Management

Cost & management accounting Techniques Application of absorption costing & marginal costingMarginal costing is defined as the costing which distinguishes variable costs and fixed costs. The main features of the marginal cost include inventory valuation, cost classification, and marginal contribution. The technique of cost classification is used to differentiate between fixed and variable costs and variable cost is further used to designthe sales policies (DRURY, 2013). The inventory valuation is used for profit measurement is valued at marginal cost. It is also used to judge the profitability of different products. It also helps to develop short-term planning, and it is also used to control costs.The absorption cost is the method for accumulating the costs which are related to the production process, and it is used to develop the inventory valuation which is stated in the balance sheet of the company. It is used for activity-based costing in order to allocate overhead costs for the inventory valuation. It is used to maintain the cost in an effective manner in accordance with IFRS and GAAP. Literature reviewAccording to Iyiola and Oyerinde (2009) accountability is also called as management of funds and control which the sensitive aspect of organizational activities. According to Tebogo (2010) absorption costing and marginal costing are the methods of costing which is used to create profit statements, assist with pricing decisions, and value inventory. Both the costing methods have differences which can be reconciled. According to Seiler (1959), the absorption method is used to value all the inventory of

the company which includes fixed as well as variable costs whereas the marginal costs only absorb only variable cost of manufacturing. The method of costing affects on preparing the profit statement of the company (Varian, 2014). On the other hand, Hoare (2010) explained the marginal accounting use for the internal decision-making process. The fixed costs are incurred regardless of the units produced, and marginal cost is usedto determine the contribution of the variable cost in the overall cost of manufacturing. The variable cost includes direct labor, direct material, and another direct cost which contributes towards the manufacturing overhead within the specific period of time (Bös, 2014). Variable costs are also known as marginal costing. According to the lal and Srivastava (2008), the product cost is not considered as fixed manufacturing overhead in the inventory valuation process. Critical analysisFrom the above literature review and previous research on the applicability of marginal costing and absorption costing it is shown that both are different from each other. The marginal costing technique is decision making in a manufacturing costing through absorbing the cost of the manufacturing (Weygandt, 2015). There are various applications of the marginal costing techniques such as managerial decision related to the prediction of optimum selling place, to determine the effect of reduction in current price on the profitability of the company, choosing of good product mix, calculation of margin of safety, and decision regarding the selling of products and services at distinguishes prices to the different customers.

Running head: PERFORMANCE MANAGEMENT
Performance Management
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1PERFORMANCE MANAGEMENT
1. What was Yahoo trying to achieve with the performance management system it
implemented?
Answer- While there are several different types of human resource activities that could be
combined for helping several companies to keep their best employees, the performance
management was considered to be one of the significant lever that Marissa Mayer, CEO of
Yahoo had decided to use for helping her in achieving her strategic objectives (Mclntire).
Right after joining the company in the year 2012, Mayer had implemented in the company
the employee performance review in order to assess the performance of the employees
working in the organisation. Yahoo was intended to improve the productivity of its
employees and improve their engagement with the business. The company was trying to
promote closer relationship in between the bonus pay-outs and job performance of the
employees. With the same, with the implementation of the performance management system
within the company, the main objective of Mayer is to retain the top talents in the firm while
removing the employees who are ineffective and unproductive.
2. What type of performance appraisal method did Yahoo apply to this case? What are the
strengths and weaknesses of this type of method?
Answer- The types of performance appraisal method that Yahoo applied to this case was of
stack ranking, introduced by GE CEO Jack Welch (Djurdjevic and Wheeler). It is to note that
Mayer was given the task of economizing the strategies of the company and reviving the
deteriorating fortunes of the company. In order to this, Mayer introduced QPR system. The
low ranking employees were fired by the management while the higher ranking ones were
rewarded and retained (Hambrick and Lovelace). The Strength of this system was that
through this method, the company could easily identify the productive employees. On the
other hand, the weakness of this include that it caused employee morale issues.