Reeve, J. M. 1989. The impact of variation on
operating system performance. Proceedings of the Third Annual Management
Accounting Symposium. Sarasota: American Accounting Association: 75-89.
Summarized by Nicole Sackedis
Master of Accountancy Program
University of South Florida, Fall 2000
Engineering departments don’t have system designed to
update standards on a frequent basis.
Resulting in accounting systems
lagging engineering reality.
Any ideas about a solution to this problem
END MEASURES
This is the information that comes from the standard cost
system; it only serves as a control function, not a corrective tool.
PRODUCTION ORIENTED ONLY
Assumption made by using engineered costs. These cause
some problems.
Performance of systems is multidimension - so achieving
the most for the least, which can
lead to dangerous conflicts on
dimensions of quality, deliverability and service
An assumption that summed sub-factor efficiencies will
lead to global efficiency is under question.
DATA AGGREGATION
Serious shortcoming-aggregation of time order data into
an accumulated variance of performance overtime. Data behavior overtime
gives important evidence about causes of process behavior.
TOP DOWN/NARROW CONTROL
Worked well in repetitive and process focused
manufacturing. However, work is being organized in cross-functional teams,
resulting in the definition of responsibility centers expanding.
A top down approach does not provide for employee
improvement.
Consequences:
Fear
Improper tracing of responsibility
PERFORMANCE LEVELS
Measured against standard levels, this ignores
issues of variation.
STATISTICAL PROCESS CONTROL
STATE OF CONTROL
Original use was to improve output of manufacturing
system.
Control chart preserves the time order in data and
provides the audit trail for improvement work.
Important for 2 reasons to accountants: processes that
are not in control are not predictable and the performance appraisal
system should recognize the distinction between in and out of control.
RELATIONSHIP BETWEEN COST AND VARIATION
Two types of variation—process and product variation.