David Krause1 · What the report has to deliver
Most monthly reports fail not for lack of figures but because there are too many. Twelve pages of cost type lists answer no question. One page with five key figures, a decomposed variance and a commentary does.
| Management's question | Building block in the report | Size |
|---|---|---|
| Where do we stand? | key figures plan, actual, variance | five lines |
| Why? | variance split by cause and responsibility | three lines |
| What are we doing? | commentary with action, owner, date | four sentences |
| Where do we end up? | full-year projection | one line |
2 · The report: cost center 210, September
Planned values from the BAB: 3,393 machine hours and €157,325 per year, i.e. 283 hours and €13,110 per month. Planned cost rate €46.37/MH, of which €28.70 fixed and €17.66 variable (Chapter 5.10).
| Key figure | Plan | Actual | Variance | Status |
|---|---|---|---|---|
| Machine hours | 283 h | 255 h | −28 h (−9.9 %) | out of range |
| Cost center costs against flexed budget | €12,619 | €13,269 | −€650 (−5.2 %) | out of range |
| Absorbed costs against flexed budget | €12,619 | €11,824 | −€795 (−6.3 %) | out of range |
| Completed orders with more than 5 % post-calculation variance | 0 | 1 of 6 | titanium housing +9.0 % | watch |
| Over-/under-absorption of the cost center | €0 | −€1,445 | −€1,445 | out of range |
The 5 % threshold is set in advance. Whoever picks it while writing will always find one that fits.
| Variance | Calculation | € | Responsibility |
|---|---|---|---|
| Volume | absorbed 11,824 − flexed budget 12,619 | −795 | sales, order situation |
| Spending | flexed budget 12,619 − actual costs 13,269 | −650 | production |
| Total | absorbed 11,824 − actual costs 13,269 | −1,445 |
Finding: the cost center is under-absorbed by €1,445 in September. Cause: €795 arises because 28 machine hours were missing — a customer call-off was moved to October. €650 is excess tool consumption on the titanium lot; post-calculation shows +9.0 % against the quotation costing there. Action: tool life trial with a second cutter, owner production management, result by 31 October. Outlook: the missing hours will be caught up in October; if the excess consumption persists, the planned times of the part will be adjusted.
| Assumption | Calculation | Full-year effect |
|---|---|---|
| Utilization stays at 90 % | 339 missing hours × €28.70 fixed cost share | −€9,700 |
3 · Why the decomposition carries the report
= €8,116 + €17.66 × 255 h = €12,619
Volume variance = absorbed costs − flexed budget = 11,824 − 12,619 = −€795
Spending variance = flexed budget − actual costs = 12,619 − 13,269 = −€650
Without the decomposition the report would say “costs €159 above plan” — €13,269 against €13,110. That sounds harmless and is misread: the cost center worked 28 hours less and should therefore have cost less. Only the flexed budget reveals that two problems with two different owners coincide.
4 · The commentary: four sentences, fixed order
| Sentence | Content | Weak commentary | Usable commentary |
|---|---|---|---|
| Finding | the figure that counts | “Costs slightly above plan.” | “Cost center under-absorbed by €1,445.” |
| Cause | decomposed, with amount | “Lower utilization and higher tool costs.” | “€795 missing hours, €650 tools on the titanium lot.” |
| Action | what, who, by when | “Being monitored.” | “Tool life trial, production management, 31 October.” |
| Outlook | what happens next | missing | “Hours come in October; otherwise adjust planned times.” |
The commentary does not repeat a figure already in the table without explaining it. And it contains no cause without an amount behind it.
5 · Five rules for the report
| No. | Rule | Why |
|---|---|---|
| 1 | Same structure every month | the reader finds the figure without searching |
| 2 | Set thresholds in advance | otherwise every variance gets explained away |
| 3 | No costs without a reference base | costs against plan mislead, costs against flexed budget do not |
| 4 | Every action with owner and date | otherwise it is an intention |
| 5 | Follow up last month's actions | otherwise the report becomes an archive |
6 · Link to the textbook
| Building block | Origin | In the book |
|---|---|---|
| Planned cost rate, fixed and variable | BAB and flexible standard costing | Ch. 5.9–5.10 |
| Variance of individual orders | post-calculation at planned rates | Ch. 12 |
| Value of a missing machine hour | contribution margin per bottleneck hour | Ch. 13.6 |
| Tool consumption as a cause | cost per spindle hour, cost per part | Ch. 15, tool purchasing |
7 · Checklist
- 1Does the report fit on one page?
- 2Are actual costs set against the flexed budget, not the static plan?
- 3Are spending and volume variance shown separately?
- 4Is there an amount behind every cause?
- 5Does every action have an owner and a date?
- 6Are last month's actions ticked off or open with a reason?
