ACT B313F Management and Cost Accounting – Spring Term (2020)
Extended Essay (100 marks)

Due Date: 24 May 2020 (Sun) 5:00pm

The essay should be written in double-line spacing with font size of 12, within 1,000 to1,200 words

Many organizations use variances to identify deviations from planned performance. Analyzing variances is an important mechanism to monitor operations and to evaluate the responsible managers’ performance. It requires a good understanding of the causes, connections and theinterrelatedness of the activities in the organization.

You are required to write an essay to discuss how variance analysis can be effectively used as a tool for performance evaluation. Your analysis should include a FICTITIOUS CASE EXAMPLE to demonstrate how the technique is applied.
Guidance for developing the case example:

  1. Select an industry sector from the list below.
    a. Fast food industry
    b. Construction industry
    c. Transportation industry
  2. Create a story about a business within this industry, focusing on how variance analysis is
    used to evaluate the performance of managers from different business functions. All the
    backgrounds must relate to the business and its industry you have selected.
  3. Based on what you have learnt from the course, demonstrate how variances are developed
    (showing all calculations). You should use fictitious budgeted and actual data in your
    illustrations, i.e. you need to make up your own data in the case.
  4. Discuss how each of the variances is used to evaluate the responsible manager’s
    performance in each business function.
  5. Explain, with the examples in your story, the importance of understanding the causes of a
    variance when carrying out performance evaluation and how variance analysis can be
    effectively used as a control mechanism in performance evaluation.
    Your work will be judged by the completeness and reasonableness of the illustrative examples
    that are relevant to selected industry. Doing some simple industry research will give you
    insights to build the case.