ACCT 1B Study Guide - Final Guide: Controllability, Intelligent Dance Music
16 Jun 2020
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Materiality: usually expressed as a % of difference from budget. Will set a % by which all differences over/under are investigated. Controllability of the item: exception guidelines are more restrictive for controllable items than for items not controllable. It may be there are no guidelines for noncontrollable real estate taxes are way off budget. No reason to investigate; the cause is higher tax rate or higher assessed property values. Reporting principles: responsibility should be based on certain reporting principles. The responsibility accounting system starts with lowest level of responsibility for controlling costs and moves upward to higher levels. A responsibility reporting system allows management by exception at each level of responsibility. Each higher level can get the detailed reports for each lower level. Chicago plant manager can easily rank department managers for controlling costs. Comparative rankings provide further incentive to control costs. 1st level: the fabricating department manager reports budget to actual costs to books at costs for his department.
