Disadvantages in planning operation variance to improve performance.

The.ex-post budget is indeed based on actual results. However, the subjectivity in setting such a budget refers to the process of determining the budgeted amounts before the actual results are known. The difficulty lies in accurately predicting and estimating the future performance and expenses, which can involve subjective judgments and assumptions. Once the actual results are known, the ex-post budget can be compared to the actual performance to assess the managers' performance. However, if the budget was set subjectively or inaccurately, managers whose performance is reported to be poor based on that budget may question its validity as a performance measure

Sorry I still dont understand what 'ex-post' is and why its difficult. Does this point just mean that if there is an adverse variance between the original budget and actual results, managers will try and blame the original budget being subjective and therefore try and shift blame?

Is this the question that asks which 2 of the following sentences about the manipulation issues involved in revising budgets are true? 1)The establishment of ex-post budgets is very difficult . Managers whose performance is reported to be poor using such a budget are unlikely to accept them as performance measures because of the subjectivity in setting such budgets. 2)Frequent demands for budget revisions may result in bias 3)The operational variances do not give a ‘fair’ reflection of the actual results achieved in the actual conditions that existed. 4)The analysis does not help in the standard setting learning process So the answer is 1 and 2. Do you understand why 3 and 4 are not correct then that is enough.

One of the problems of planning and operational variances is 'There can be a conflict between operating and planning staff, each laying the blame at each other' I thought planning variance was not uncontrollable. Who is the planning staff? :)

Sorry I didnt see your previous reply. No it from the Kaplan textbook that discusses the advantages and disadvantages of undertaking operating and planning variances analysis.

Planning variances are the responsibility of the budget committee/std setting managed These are down to bad/good planning decisions Operational are due to the procurement/purchasing & production manager These are due to good/bad decisions

Oh ok that clears it up! I was thinking only operational are controllable. But when we speak of planning variances and uncontrollability- we are usually talking about it from the point of view of operational managers.