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An increase in the selling effort will affect the selling and administrative budget and the financial budget more funds will be needed Lowering the selling price, if the unit sales level originally forecast is just regained, will result in lower cash receipts than in the original financial budget A decision to reduce production to avoid piling up inventories will affect purchase orders, labor costs, variable overhead costs, income taxes, and other budgeted items The actions have been signaled by a variation from the sales forecast, but a change in plans affects all the budgets and forecasts Any sizable variance from budgeted figures, favorable or unfavorable, should be looked into Management should find out why the variance resulted so that when it takes action, it will be reasonably sure it is acting wisely For example, a favorable variance in direct labor costs might be due to a special incentive program.

Why does Google AdWords use such a complex system The Quality Score and Ad Rank are some of the most important ways to manage your account, but it s safe to say very few people have even heard of these. It doesn t help that Google is unnecessarily secretive. Google didn t invent PPC. That started at GoTo.com (later bought by Yahoo!). Google s innovation was the use of CTR, QS, and Ad Rank to rank ads. These had the following far-reaching effects:

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In such a case, management should put off any plans to use the surplus funds until it is sure that a reduction in labor costs will be permanent Unfavorable variances from the budget should not be studied separately from related budget items For example, suppose the actual selling expense is much higher than the amount budgeted It may turn out that the extra expense produced a large volume of new orders In that case, the added cost may be entirely justifiable Hasty action to reduce the expense without investigation might result in loss of sales and a net reduction in profits Great care must be given to seeking out the causes of variances, and the consequences of possible control action should be analyzed carefully in order to avoid unintended and unwanted results..

Note that the multiplication operators must be shown explicitly. Thus, the arithmetic expressions 2 (x1 + 3 * x2) and 2 * (x1 + 3 x2) are incorrect.

Great for consumers When consumers search for products, Google shows the most relevant ads at the top. Good for advertisers CTR and QS reward advertisers who improve their campaigns. They get a higher ranking and lower CPCs. Well-managed accounts will substantially outperform competitors and be very profitable. Good for Google They earn more if 50 people click on a well-written $1 ad instead of two people clicking on a poorly written $10 ad. Very bad for lazy advertisers If advertisers ignore the QS, have poor ads, and don t have a dedicated landing page, their ads will get a lower position and won t be shown as frequently, and Google will charge them more for the click. They are literally pushed to the bottom. A large corporation with an unlimited budget but a poor strategy will not be successful in PPC. We know several cases where large corporations rank lower than small companies with daily budgets that wouldn t even buy a round of coffee at Starbucks. The little guys did a great job at optimizing their ad groups and landing pages.

Costs are classified as variable (product costs) and fixed (period costs). With these classifications, management can determine which of its products contributes the most and which the least to covering

fixed cost and providing a profit. Direct costing provides information for decisions to expand, reduce, or continue production of a given product line or product. In a standard-cost system, product costs for materials, labor, and overhead are budgeted or planned before the actual production takes place. The pre-established costs then provide a point of reference for analyzing the costs of actual production. By analyzing the variances from these standards, the manufacturer can identify the sources of excessive cost and investigate the causes. This kind of process the identification of a problem area and the discovery of its cause can point the way to actions that will reduce costs and improve profit.

Google s QS system means that PPC is not an issue of bid management. Many PPC companies tell you they will manage your bids. That s nice, but you will get better results if you improve your QS.

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