Using Variance Analysis to Evaluate Strategic Success Level: Long-Term Perspective
Stratejik Başarı Düzeyinin Değerlendirilmesinde Varyans Analizleri: Uzun Vadeli Perspektif

Author : Rifat YILMAZ
Number of pages : 149-164

Abstract

Every competitor in a particular sector has a specific competitive strategy whether it is clearly defined or not. In order to evaluate the success of a selected strategy on the financial statements, the increase in profitability requires analysis with variance analysis. The analysis of the increase in profitability with variance analyzes, in addition to the evaluation of the success of the applied strategy, increase profitability, improve performance and achieve strategic goals. One of the factors effecting profitability is cost. Costs are considered as fixed and variable within themselves, but all costs will vary in the long term. Indirect costs, capacity costs and service costs, which are considered to be fixed in the short term, vary in the long term. Therefore, when increase in profitability is analyzed in the long term, it would be more appropriate to consider this increase rather than analyzing that a constant capacity, considering that all costs are variable. In this study, it was discussed what elements of variance analysis should be done according to the assumption that all costs are variable in the long term. For this purpose, a sample application is made for a hypothetical company. The reasons for the increase in profitability have been determined by separating the four components. These are; sales volume growth (growth), price recovery, efficiency and underutilization capacity effect. Separate treatment of underutilization capacity effect has been shown to contribute to a more clear analysis of the strategic effects of the other three components in the analysis of the increase in profitability.

Keywords

Strategic Analysis of Income, Strategic Analysis, LongTerm Perspective, Activity- Based Costing

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