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ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting

Which item should normally be excluded from a budget report used to assess a department manager's performance?

Apportioned head office costs should be excluded or shown separately. Managers should be judged on controllable items, and these costs are outside their influence. Materials ordering, authorised overtime and repair decisions are all controllable, so they belong in the assessment.

  1. ACosts of materials the manager orders
  2. BOvertime wages the manager authorises
  3. CHead office costs apportioned to the department, which the manager cannot influenceCorrect
  4. DRepairs the manager decides to carry out

Explanation

Reports for control should separate controllable from uncontrollable costs. Apportioned head office costs are outside the manager's influence, so including them in assessment is demotivating. The other items are decided by the manager.

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