Which function of management accounting focuses on performance evaluation?

The function of management accounting that focuses on performance evaluation is centered on assessing the effectiveness and efficiency of resources. This involves measuring how well an organization utilizes its resources—such as personnel, equipment, and capital—to achieve its objectives. Performance evaluation encompasses a variety of metrics and reports to determine success and identify areas for improvement, ensuring that resources are being put to the best possible use.

This aspect of management accounting is vital for understanding operational performance, as it allows management to make informed decisions based on actual data. By utilizing tools such as variance analysis, key performance indicators (KPIs), and benchmarking, managers can evaluate how well different departments or segments are performing against set goals and standards, facilitating continual improvement.

In contrast, budgeting for future projects primarily focuses on financial planning rather than evaluating past performance. Determining the price of products relates to pricing strategies and market factors rather than the assessment of resource utilization. Managing cash flows is essential for financial health but does not directly connect to the evaluation of performance metrics or efficiency improvements.