BEC 2 Budgeting Flashcards
Attainable standards
Currently attainable standards represent costs that result from work performed by employees with appropriate training and experience but without extraordinary effort.
Ideal standards
Costs that result from perfect efficiency and effectiveness in job performance.
Flexible budget
A flexible budget is a budget that can be adjusted to any activity level, it shows how costs vary with production volume.
Budget total costs
= (Variable cost per unit x activity level) + fixed costs
Fixed costs in total are constant over the relevant range of activity level.
Master budget
A master budget documents specific short term operating performance goals for a period of time, normally one year or less. The plan generally includes an operating (non financial) budget as well as a financial budget.
Operating budgets included in the master budget
Sales budget Production budget Direct materials budget Direct labor budget Overhead budget Cost of goods sold budget SG&A budget
Financial budgets included in the master budget
Cash budget
Pro forma financial statements
Direct materials price variance
Actual quantity purchased x (Actual price - Standards price)
Direct materials quantity usage variance
Standard price x (Actual quantity - Standard quantity)
Direct labor rate difference
Actual labor hours x (Actual rate - Standard rate)
Direct labor efficiency variance
Standard price x (Actual hours - Standard hours)
Manufacturing overhead variances
One way
Overhead variance = Actual OH - Applied OH
Manufacturing overhead variance
Two way
Budget variance = Actual OH - ( Budgeted FOH + (Std DLH x Std VOH rate))
Volume variance = (Budgeted FOH + (Std DLH x Std VOH rate)) - Applied OH
Manufacturing overhead variance
Three way
Spending variance = Actual OH - ( Budgeted FOH + (Actual DLH x Std VOH rate))
Efficiency variance = (Budgeted FOH + ( Actual DLH x Std VOH rate)) - (Budgeted FOH + (Std DLH x Std VOH rate))
Volume variance = (Budgeted FOH + (std DLH x Std VOH rate)) - Applied OH
Volume variance
Budgeted fixed overhead - Applied fixed overhead
OR
(Actual production in units - Budgeted production in units) x Per unit standard fixed overhead rate
Efficiency variance
(Actual DLH - Standard DLH allowed) x Standard variable overhead rate
Market size variance
(Actual market size - Expected market size) x Budgeted market share % x Budgeted contribution margin per unit
Market share variance
(Actual market share % - Budgeted market share %) x Actual industry units x Budgeted contribution margin per unit
Sales volume variance
(Actual sold units - Budgeted sales units) x Standard contribution margin per unit
Selling price variance
((Actual SP/Unit) - (Budgeted SP/Unit)) x Actual sold units
Contribution by SBU
The difference between the contribution margin (Revenue - Variable costs) and controllable fixed costs (those costs that managers can impact in less than one year)
Balanced scorecard
The balanced scorecard displays performance relative to critical success factors identified for multiple dimensions of a business operations
Balanced scorecard dimensions
Finance
Internal business process
Customer satisfaction
Advancement of human resources innovation
Types of responsibility segments that are used to establish business performance measures
Cost SBU - managers are held responsible for controlling costs
Revenue SBU - managers responsible for generating revenues
Profit SBU - managers responsible for producing a target profit
Investment SBU - managers responsible for return on investment
