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ACCA Strategic Professional · Advanced Performance Management · Management reports

Brindle Foods' production director receives a report showing total factory overheads allocated from head office, including costs she cannot influence. Her bonus is partly based on this report's profit figure. Which criticism of the report is most valid?

The most valid criticism is that the report breaches controllability: it includes allocated head office costs the director cannot influence, yet links them to her bonus. This distorts performance assessment and can demotivate, so the report should separate controllable and uncontrollable items.

  1. AIt is too timely, giving her too little time to reflect
  2. BIt fails the controllability principle because it includes costs outside her control, which may demotivate her and distort behaviourCorrect
  3. CIt is too accurate, since management reports should be approximate
  4. DIt contains too many non-financial measures

Explanation

Responsibility reporting should separate controllable from uncontrollable items so managers are assessed on what they can influence. Including allocated head office costs distorts assessment and can demotivate. Timeliness, accuracy and non-financial content are not the issue described.

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