Accounting for control Flashcards

Week 7

1
Q

Standard budgets vs budgets

A

A standard is the expected cost for one unit, so will help create budgets. A budget is the expected cost for all units

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2
Q

Standard costs

A

Planned unit costs produced in a period. Used for planning labour, material etc. Are we off target etc?

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3
Q

Basic standard

A

DO NOT CHANGE over many years so monitor performance. They may not reflect current production context so no learning curve

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4
Q

Ideal standard

A

PAST PERFORMANCE and 100% efficiency, so no wastage, machine downtime. Used to continuously improve but assumes nothing will go wrong like a worker will never miss a day so wont reach their budget

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5
Q

Practical standard

A

ACHIEVABLE standards under efficient conditions. Normal machine downtime, some waste. Tight but realistic

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6
Q

Price standards

A

what do we think we can have a price for, taking account things we know we need to do. Assumes people buying for us are doing a good negotiation job

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7
Q

Quantity standards

A

Design specification tells you how its going to be made and what quantity of each material you need to use

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8
Q

Rate standards

A

what we think we can get our workers for, considering competitive rates and minimum wage (predetermined overhead rate)

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9
Q

Time standards

A

Watch workers to see how long it takes them to do something, then calculate how long to give them on making a product. However, if they know they are being watched they’ll perform quicker so making this product wont be that time

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10
Q

Base rate

A

the activity used to calculate the predetermined overhead rate

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11
Q

Variance

A

Variance is the difference between planned/budgeted and the actual cost incurred.
If its unfavourable= actual costs exceeds standard cost (adverse)
If its favourable= actual cost is less than standard cost, e.g. you paid less for materials then excpeted but does that mean less quality?

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12
Q

Static budget

A

budget for planned activity, but if actual is different for planned this budget will be misleading
static budget shows higher planned activity= variable costs lower
static budget shows lower planned activity then variable costs are higher

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13
Q

Variance analysis cycle

A
  1. Questions- Why is it more or less than expected
  2. Explanations, e.g. we used more materials
  3. Action- from managers
  4. Conduct change- e.g. change the materials quality
    Queen enrico and cait
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14
Q

Price variance

A

Actual quality[what is should have cost](Actual price- what did it cost-standard price

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15
Q

Quantity variance (or usage variance)

A

Standard price(Actual quantity-standard quantity [should have used]

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16
Q

Actual quantity

A

all stock- stock used at end, e.g. metres

17
Q

standard quantity

A

if its per x all units produced or to get per /AQ

18
Q

causes for variance

A

e.g. price favourable because of economies of scale or unfavourable because of inflation
e.g. material favourable because trainers were really trained well, or unfavourable because issues with machines
e.g. efficiency variance was low because poor materials= account for wastage

19
Q

Rate variance (spending)

A

Actual hours(actual rate-standard rate)
total/hours to get per

20
Q

Efficiency variance

A

Standard rate (actual hours-standard hours)

21
Q

to get ‘per’ actual rate

A

cost of working/hours worked

22
Q

if its favorable or unfavourable

A

answer will be minus for favorable, positive for unfavorable

23
Q

in example

A

AP= direct materials/ total £
SQ= quantity required x actually produced
AR= total £/actual direct labour hours
SH= standard hours/standard produced x actual produced