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Greetings Sir,
Sir i wanted to know is there any specific reason/logic as to why Sales Volume Planning Variance is being called as Market Size Variance and Sales Volume Operational Variance is being called as Market Share Variance ?
It is because higher sales due to the market as a whole increasing is not something that is under the control of the company.
If there are higher sales due to having a higher share of the market then this is something that the company has controlled.
Sir does this also means that organisation while setting their Sales Volume Budget, takes into to consideration the possible market size of the particular product in which they deal in and then decide the same.
Thankyou Sir.
There are few more things that i wanted to ask under the same topic
1) If the Operational Manager is also involved in the planning process and setting standards, in that case he/she is also responsible for planning variances”
Taking a hypothetical example where the operational manager is also involved in the planning and standard setting phase. If we are then asked to assess the performance of the Operational Manager.
Shall we simply assess the manager bases upon the Total Variance or shall we still bifurcate the Variances in planning and operational variance and then highlight the extent to which the manager is responsible because of poor planning/standard setting and extent to which the manager is responsible for poor/ good operations.
2) Just like we assess the performance of the Operational Management based upon the Operational Variance.
What about the organisation as a whole? should it be also assessed simply upon the Operational Variance or based upon the Total Variance?
Variances are not used to assess the performance of the organisation as a whole!
They simply analyse the reasons for the actual profit being higher or lower than the budgeted profit so that actions can be taken to try and correct any adverse variances in the future.
They are also used as one way of measuring the performance of individual managers. It is the operational variances that are more important in this context because they are under the control of the managers. Planning variances need examining but are more likely to be caused by external factors that are outside the control of managers. If the planning variances result simply from errors in budgeting that they are the responsibility of the manager involved whether or not it is the same person responsible for the operations.
Have you watched all of my lectures on variances?
Thankyou Sir and yes i have watched your Lectures on variances (from basic one to advance)
Sir in one of the requirement of Block Co Question (June 2013), which pertains to Planning and Operational Variance.
It has been mentioned to ” Briefly discuss the performance of the business and, in particular that of the sales manager for the quarter ended 31 May 2013″.
So doesn’t this mean that along with the performance of Sales Manager, the performance of organisation as a whole shall also be assessed?
Yes it does and that should be clear to you from the examiners answer.
Given that the information given only relates to sales, then you comment on the total of the sales variances as to whether the overall revenue is higher or lower (and why). As far as the individual managers are concerned you comment on the relevant individual variances.
Thankyou for your help Sir.
Before asking this i checked the answer in my B.P.P Exam Kit, in which they have simply started with the assessment of performance of Sales Manager.
So that’s why i asked you about this.
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