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EVALUATING STRATEGIC PROFIT PERFORMANCE - Coggle Diagram
EVALUATING STRATEGIC
PROFIT PERFORMANCE
STRATEGIC PROFITABILITY
varialble
the profit wheel
operating expenses
sales
profit
investment in new assets
variances analysis
types of variances
favorable
unfavorable
strategic profitability
analysis of competitive effectiveness
analysis of operating efficiencies
ANALYZE PROFIT PERFORMANCE
types of measures
effectiveness
efficiency
condition
Ability to measure outputs
Existence of a predetermined standard of performance
Ability to use variance information as feedback to adjust inputs and/or process
COMPETITIVE EFFECTIVENESS:
MARKET SHARE VARIANCES
Computing Market Share Variances
key variables affect profitability
attributable to market share
increase/decrease in profit due to changes in market size
increase/decrease in profit due to changes in market share
COMPETITIVE EFFECTIVENESS:
REVENUE VARIANCES
Computing Revenue Variances
sources of revenue-based profit
increase/decrease in profit due to changes in prices
increase/decrease in profit due to changes in product mix
steps
#1
dig into the company records to find out how much of the profit variance was attributable to changes in selling prices
#2
focuses on product mix
VOLUME-ADJUSTED
PROFIT PLAN
Calculating a Volume-Adjusted Profit Plan
OPERATING EFFICIENCIES:
NONVARIABLE COSTS
Calculating Variances for Nonvariable Costs
types of nonvariable costs
activity-based costs
estimate three variances
impact on profits due to changes in efficiency
impact on profits due to changes in cost of resources
impact on profits due to changes in cost-driver activit
discretionary expenses
committed costs
OPERATING EFFICIENCIES:
VARIABLE COSTS
variable costs change with
an efficiency ratio of inputs to outputs
the prices of input factors
output volume
additional variances that be calculated
efficiency variance
production spending variance)
Calculating Production Efficiency and Cost Variances (If Applicable)
INTERPRETING STRATEGIC
PROFITABILITY VARIANCES
Searching for Explanations and Initiating Action Plans
USING STRATEGIC
PROFITABILITY ANALYSIS
Early Warning and Corrective Action
Performance Evaluation
Strategic Learning