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The City of Toth produces monthly budgetary control reports. The amount shown in the budget column is 1/ 12 of the annual budget. Over lunch, two department heads were discussing this report. The first manager said, I like the idea of using 1/ 12 of my annual budget each month. My costs are constant throughout the year. I can usually find small savings and show favorable variances each month. The second manager disagreed. I don't like it. Most of my costs are incurred during Carnival and around Christmas. As a result, I always have unfavorable variances in March and December regardless of what I do. It is especially upsetting because employee performance appraisals are made in April, and the council looks especially hard at our March results.What is the problem with the way these control reports are prepared? What should be done to make the reports more reflective of the actual performance of the departments?
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