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ACCA Strategic Professional · Advanced Performance Management · Management reports

Brindle Foods reports monthly to its production manager the total factory overhead allocated from head office, including a share of corporate IT and legal costs. The production manager is assessed on the report but cannot influence these allocations. Which principle of good report design is most clearly breached?

The breached principle is separating controllable from uncontrollable items. A manager should be assessed on costs and revenues they can influence. Including allocated head office costs they cannot affect distorts performance assessment and may demotivate, so these should be shown separately or excluded from their assessment.

  1. AReports should be produced as quickly as possible regardless of accuracy
  2. BReports should distinguish controllable from uncontrollable items for the person being assessedCorrect
  3. CReports should only include non-financial measures
  4. DReports should always be presented at the most aggregated level

Explanation

Responsibility accounting requires that managers are judged on items they can influence. Including allocated head office costs mixes uncontrollable items with controllable ones, which distorts assessment and can demotivate. Aggregation or the exclusion of financial data does not solve this.

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