BEC Homework 2.2 Flashcards
Master budget
Master budget is overall budget consisting of many smaller budgets that is based on one level of production. The master budgets include the entire company
Flexible budget
IT can be prepared for any production level within a relevant range. It is a series of budgets based on different activity levels within the relevant range. It is appropriate for any activity that has variable costs. They give management the opportunity to compare actual results to the budget for the activity level achieved
Volume overhead efficiency variance
Budge table variable based on standard hours =Standard Direct labour hours allowedxStandard overhead variable rate
Budgeted Variable OH=Actual labour hoursx standard OH variable rate
(OR)
SH-AHxSR
production volume variance
(Actual units produced - Budgeted units produced) x Budgeted overhead rate
AUP-BUPxBOHPU
Material price variance
AP-SPxAQ
Variable spending OH Variance
Budget variable -actual
Strategic business unit SBU
Responsibility from highest order Investment SBU-profit-revenue-cost
Balance score card
Reports management info regarding organizational performance as defined by critical success factors. These critical success factors are often classified as human resources business processes, customer satisfaction, and financial performance to demonstrate no single dimension of organizational performance can be relied upon to evaluate success.Criticalsucess factors…Financial,Internal business process, customer and human resource considrations. It integrates financial with non-financial measures. Innovation is the perpective Defined by balance score card
ROI
Evaluates business performance in terms of the dimensions of revenue expense and investment the measurement all are financial
KAIZEN
Kaizen is synonomous with continuous improvement but not multidimensional
Market value added
Contemplates to the degree to which management actions improve stockholders value
Investment Center
Investment center is most likely an independent business
Successful responsibility accounting system
A reasonable separation of costs into their fixed and variable components since fixed costs are not controllable and must be eliminated from the responsibility report
Financial and non financial measures
Financial and non-financial features of an organization that contribute to its success in achieving strategy are referred to as critical success factors and are normally classified as: 1. Financial solvency and return, 2. Customer satisfaction, 3. lntemal business processes, and 4. Human resource innovation.
what all will be included in performance measures
A user focus
specific time horizons
exceptional items that are controllable
Authoritattive standerds
Standereds imposed by management without employee input
Participative standards
Standerds imposed by management with collaboration to employee input
Ideal Standerds
Are based optimum condition
Attainable standards
per unit budget with normal conditions
The information in COGM Budget would directly relate to
Material used, Direct Labour, OH applied and finished goods
firm develops an annual cash budget in order to
Avoid the oppertuity cost of noninvested excess cash and minimize the cost of interim financing. It is don’t after all budgets have been prepared. Cash budget is not for the need of internal financing. Cash budget must be completed before the forecasted balance sheet. Statement of cash flows is the last proforma statement prepared . because all the other things or budgets affects cash.
The financial budget process include
cash and capitol purchase budgets and balance sheet and statement of cash flows.
difference between Flexible budget and static budget
A flexible budget provides cost allowances for different level of activity. cost budget provides budget for one level of activity. Both budgets can be prepared by any level of management. Both budgets are used for planning . Both include variable nad fixed costs/
For a company that produces more than ne product
sales volume variance can be divided into sales quantity and sales mix
Learning and growth
Employee satisfaction and retention
Two way material price variance
Actual quantity x Actual price -Actual quantity x Standard price = difference
Standard quantity allowed x standard price - actual quantity used x standard price
Controllable margin
controllable margin is computed as contribution margin less controllable fixed costs
The customer perspective of a balance score card which examines a comapnys sucesss in a targeted market
customer.
The financial perspective is concerened with the capture of the increased market share
internal busiess prospects of a balanced score card is concerned with maintaining low costs.
the learning and growth is tied to reward and recognition
Flexible budget variance
Actual- Flexible budget actual
Volume variance
Flexible budget actual- Volume variance
Spending variance
Actual hours X actual rate- actual hours X standerd rate
Fixed O/H Volume variance
Fixed OH Rate x actual production- Fixed overhead rate x Standard production
Material efficiency variance can be caused by
actions of the purchasing department
design of the product
skill level of the labor force
production volume variance is due to
difference in the planned level of the base used for overhead allocation and the actual level achieved. production volume variance is the variance in an absorption costing system that measures the departure from the denominator level of activity that was used to set the fixed overhead rate.
efficiency variance
production volume variance is the variance in an absorption costing that measure the denominator level of activity that was used to set the fixed OH rate
Variable overhead spending variance
is most controllable by plant manager and somewhat by production control
Discretionary costs
are costs arising from periodic budgeting decisions by management to spend in certain areas not directly related to manufacturing
Incurred marginal costs
are the sum of variable and avoidable fixed costs necessary to have one unit increase in activity
Opportunity costs
is the maximum benefit foregone by using a scarce resource for a given purpose. it is the benefit provided by the next best use of that resource
Residual income
is income excess of a fixed return of a invested capitol
Least associated with target pricing
price stability, price justification fixed cost recovery
costs relevant to made or buy decision include variable material variable labor
avoidable fixed costs
