Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 59

Financial versus Nonfinancial Performance Indicators for Operational Control As indicated in the text, both financial and nonfinancial performance indicators play important roles in an organization’s overall operational control system. Explain, concisely, the relative advantage of each type of performance indicator. That is, what role would each type of performance indicator play in helping to ensure that operations are in control? (Hint: Think about this issue both from the standpoint of managers and from the standpoint of operating personnel.)

Step 1 of 3

The manufacturing process includes different types of costs which includes fixed costs and variable costs. It includes costs related to raw material, direct labor and direct manufacturing overheads. When variable costs are deducted from the sales price then it is called as contribution.