BEC 2.2 Flashcards
Planning techniques: Budgeting and analysis
Define currently attainable standards
Currently attainable standards represent costs that result from work performed by employees with appropriate training and experience but without extraordinary effort
Define ideal standards
Ideal standards represent costs that result from perfect efficiency and effectiveness in job performance
Define flexible budget
A flexible budget is a budget that can be adjusted to any activity level; it shows how costs vary with production volume
Budgeted total costs = (Variable cost per unit x Activity level) + Fixed costs
Fixed costs in total are constant over the relevant range of activity level.
Define 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 (nonfinancial) budget as well as a financial budget.
List the operating budgets included in the master budget
- Sales budget
- Production budget
- Direct materials budget
- Direct labor budget
- Overhead budget
- COGS budget
- SG&A budget
List the financial budgets included in the master budget
- Cash budget
- Pro forma F/S
Identify the direct materials variances (two-way variance analysis)
1. Direct materials price variance = (AP - SP) x AQ where AP = actual price SP = standard price AQ = actual quantity purchased
2. Direct materials quantity usage variance = (AQ - SQ) x SP where AQ = actual quantity used SQ = standard quality allowed SP = standard price
Identify the direct labor variances (two-way variance analysis).
- Direct labor rate variance = (AR - SR) x AH
- Direct labor efficiency variance = (AH - SH) x SR
where:
AR = actual labor rate
SR = standard labor rate
AH = actual hours
SH = standard hours
Identify, the manufacturing overhead one-way Variance analysis.
Overhead (OH) variance = Actual OH - Applied OH
Identify, the manufacturing overhead two-way Variance analysis.
Budget (controllable) variance = Actual OH - [Budgeted FOH + (Std DLH x Std VOH rate)]
Volume (Noncontrollable) variance = [Budgeted FOH + (Std DLH x Std VOH rate)] - Applied OH
Identify, the manufacturing overhead three-way Variance analysis.
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
where
Actual OH = actual overhead
Applied OH = applied overhead (generally, standard rate x allowable hours or other input)
Budgeted FOH = budgeted fixed overhead
Actual DLH = actual direct labor hours
Std VOH rate = standard variable overhead rate
Standard DLH = standard direct labor hours
Describe two alternative ways to calculate the volume variance
Volume variance = Budgeted fixed overhead - Applied fixed overhead
Volume variance = (Actual production in units - Budgeted production in units) x Per unit standard fixed overhead rate
Describe an alternative way to calculate the efficiency variance.
Efficiency variance = (Actual DLH - Standard DLH allowed) x Standard variable overhead rate
What is the formula for market size variance?
Market size variance =
[Actual market size (in units) - Expected market size (in units)] x Budgeted market share x Budgeted contribution margin per unit (wgt avg)
What is the formula for market share variance?
Market share variance =
[Actual market share - Budgeted market share] x Actual industry units x Budgeted contribution margin per unit (wgt avg)
What is the formula for sales volume variance?
Sales volume variance =
[Actual sold units - Budgeted sales units] x Standard contribution margin per unit
What is the formula for selling price variance?
Selling price variance =
[(Actual SP/unit) - (Budgeted SP/unit)] x Actual units sold
Define contribution by SBU
Contribution by SBU represent the difference between the contribution margin (Revenue - variable costs) and controllable fixed costs (those costs that managers can impact in less than one year).
What is the purpose of the balanced scorecard?
Displays performance relative to critical success factors identified for multiple dimensions of a business operation
What dimensions or categories of business operation are frequently identified by the balanced scorecard?
(F)inance
(I)nternal business processes
(C )ustomer satisfaction
(A)dvancement of human resource innovation
List and define the types of responsibility segments (or strategic business units - SBUs) that are used to establish business performance measures
Cost SBU:
Managers are held responsible for controlling costs
Revenue SBU:
Managers are held responsible for generating revenue
Profit SBU:
Managers are held responsible for producing a target profit
Investment SBU:
Managers are held responsible for return on investment
