Describes the cost control system used in an automobile engine plant for labor and overhead costs. The finance staff prepares daily, weekly and monthly variance reports against budgets. Department supervisors, finance staff and the manager discuss the use and interpretation of these reports. Also, the company describes the budget process, are a performance improvement factor to motivate the annual productivity increases and cost reductions. Allows class, discuss whether the ext … Read more »

Describes the cost control system used in an automobile engine plant for labor and overhead costs. The finance staff prepares daily, weekly and monthly variance reports against budgets. Department supervisors, finance staff and the manager discuss the use and interpretation of these reports. Also, the company describes the budget process, are a performance improvement factor to motivate the annual productivity increases and cost reductions. Allows the class to discuss whether the extensive and detailed variance analysis systems to promote valuable management goals such as cost control, learning and improvement. One big question is whether a focus on meeting short-term budgets inhibits long-term improvements in quality and productivity.
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from
Robert S. Kaplan,
Amy P. Hutton
Source: Harvard Business School
28 pages.
Publication Date: Dec 21, 1992. Prod #: 193082-PDF-ENG
Peoria Engine Plant (A) HBR case solution

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