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The efficiency ratio indicates the expenses as a percentage of revenue (expenses / revenue), with a few variations – it is essentially how much a corporation or individual spends to make a dollar; entities are supposed to attempt minimizing efficiency ratios (reducing expenses and increasing earnings). The concept typically applies to banks.
When a company sells more than one type of product, the product mix (the ratio of each product to total sales) will remain constant. The components of CVP analysis are: Level or volume of activity. Unit selling prices; Variable cost per unit; Total fixed costs; Manpower Cost Direct and indirect
The incremental cost-effectiveness ratio (ICER) is the ratio between the difference in costs and the difference in benefits of two interventions. The ICER may be stated as (C1 – C0)/(E1 – E0) in a simple example where C0 and E0 represent the cost and gain, respectively, from taking no health intervention action.
Standard methods continue to emphasize labor efficiency even though that resource now constitutes a (very) small part of the cost in most cases. [4] Standard cost accounting can hurt managers, workers, and firms in several ways. For example, a policy decision to increase inventory can harm a manufacturing manager's performance evaluation ...
An important part of standard cost accounting is a variance analysis, which breaks down the variation between actual cost and standard costs into various components (volume variation, material cost variation, labor cost variation, etc.) so managers can understand why costs were different from what was planned and take appropriate action to ...
Throughput Accounting, therefore, removes standard cost accounting's reliance on efficiencies in general, and labor efficiency in particular, from management practice. Many cost and financial accountants agree with Goldratt's critique, but they have not agreed on a replacement of their own and there is enormous inertia in the installed base of ...
Consequently, it does not suit to analysis. The productivity model Saari is purely based on variance accounting known from the standard cost accounting. The variance accounting is applied to elementary variables, that is, to quantities and prices of different products and inputs. Variance accounting gives the user most possibilities for analysis.
The price of a product or service is defined as cost plus profit, whereas cost can be broken down further into direct cost and indirect cost. [1] As a business has virtually no influence on indirect cost, a cost reduction oriented cost breakdown analysis focuses rather on factors contributing to direct cost.