Page 587 - Sensors and Control Systems in Manufacturing

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Ele v e n
Cha p te r

charges, and that cost is not reported as part of the responsibility. The
principle of controllable-uncontrollable classification should be
treated consistently at all management levels.
An illustration of responsibility cost reporting and the pyramid-
ing construction of reports is shown in Fig. 11.3.
11.3.5 Construction of the Report
Each report delivered to a manager should be constructed according
to the usefulness to the manager of information provided by the
accounting system. The actual costs can be compared with the bud-
geted figures, standard-cost variances can be shown, and unit-cost
calculations can be made. Any presentation of the information that
promotes for sound decision making is suitable.
The classification of costs as controllable or uncontrollable can be
difficult. One of the most troublesome problems is obtaining the
agreement and cooperation of the foremen, supervisors, and manag-
ers who will be assigned certain responsibilities. It is important to
make certain that the reports will be used for making decisions and
directing activities. To this end, the supervisory employees involved
should take part in planning the reporting system. Preparation of for-
mat and content of responsibility reports can serve to involve all the
managers in the communication-information system, and the whole
process can help bring managers together into a smooth-working
team.

11.3.6 Analyzing Cost and Profit Data
The responsibility-center accounting scheme is just one way to orga-
nize cost and profit data for analyzing the results of operations. For a
firm that produces and sells more than one product in more than one
geographical area to customers that have a variety of characteristics,
many other possible types of analysis are available. Several are listed
next:
• Product lines. Analysis by product lines can show which
products are most profitable. It can point up the need for cost-
saving programs or identify products for maximum sales
promotion.
• Special orders. The results of the production of special orders
should always be analyzed to determine whether producing
to custom-design specifications is really profitable. Such
analyses could lead to special pricing formulas, better cost-
estimating procedures, and more efficient use of labor and
equipment.
• Sales analysis. The costs of selling products can be analyzed
according to various customer characteristics, taking into
account the cost of various selling efforts, as follows: