Ch. 14 & 16 - Operation Level Control

Question 1

control

Answer 1

The set of procedures, tools, and systems that organizations use to reach their goals.

Question 2

management accounting and control system

Answer 2

An organization’s core performance measurement system.

Question 3

operational control

Answer 3

The monitoring of short-term operating performance; takes place when mid-level managers monitor the activities of operating-level managers and employees.

Question 4

financial control

Answer 4

The comparison of actual and budgeted financial results.

Question 5

variances

Answer 5

Differences between budgeted and actual amounts, for either financial or nonfinancial measures.

Question 6

master budget variance

Answer 6

The difference between actual operating income and the master budget operating income for the period.

Question 7

flexible budget

Answer 7

A budget that adjusts revenues and costs to reflect varying levels of output activity (i.e., different levels of volume and mix).

Question 8

sales volume variance

Answer 8

For each income statement item, the difference between the flexible budget amount for that item and the amount for that item reflected in the master budget for the period.

sales volume variance = budgeted sales price x change in sales volume

Question 9

What is the formula to determine sales variance?

Answer 9

sales volume variance = (actual units sold – units budgeted to be sold) x master budget contribution margin per unit

Question 10

flexible budget variance

Answer 10

The difference between actual and flexible budget amounts on the income statement.

Flexible budget variance = actual results – flexible budget results

Question 11

total flexible budget variance

Answer 11

The difference between the flexible budget operating income and the actual operating income for the period.

Total flexible budget variance = actual operating income earned – flexible budget operating income

Question 12

selling price variance

Answer 12

The difference between the total actual sales revenue for a period and the sales revenue in the flexible budget for the period.

Actual sales revenue = units sold x actual selling price per unit
Flexible budget sales revenue = units sold x budgeted selling price per unit

Question 13

selling price variance

Answer 13

The difference between the total actual sales revenue for a period and the sales revenue in the flexible budget for the period.

Actual sales revenue = units sold x actual selling price per unit
Flexible budget sales revenue = units sold x budgeted selling price per unit
Therefore…
selling price variation = actual sales revenue – flexible budget sales revenue

Question 14

total variable cost flexible budget variance

Answer 14

The difference between total variable cost incurred during a period and the total variable cost in the flexible budget for the period.

Total variable cost flexible budget variance = total variable cost incurred – total flexible budget variable cost

Question 15

standard cost sheet

Answer 15

A document that lists the standard costs of manufacturing and selling one unit of a product.

Question 16

direct materials flexible budget variance

Answer 16

For each material, the difference between the total direct materials cost incurred and the flexible budget amount for this period’s output.

Direct materials price variance = (actual price paid for one unit of direct material – standard price for one unit of direct material) x total number of units of the direct material used in production

Question 17

materials usage ratio

Answer 17

The ratio of the quantity used to the quantity purchased.

Question 18

direct materials usage variance

Answer 18

For each material, the difference between the actual direct material units used during the period and the number of standard units that should have been used for the output of the period, multiplied by the standard cost per unit of the direct material.

direct materials usage variance = (total quantity of the direct material used – total standard quantity of the direct material for the units manufactured) x standard cost per unit of the direct material

Question 19

direct labor rate variance

Answer 19

The difference between the actual and standard hourly wage rate multiplied by the actual direct labor hours worked during the period.

direct labor rate variance = (actual hourly wage rate paid – standard hourly wage rate) x total direct labor hours worked

Question 20

direct labor efficiency variance

Answer 20

The difference between the actual direct labor hours worked and the standard direct labor hours allowed for the units manufactured, multiplied by the standard wage rate per hour.

Question 21

standard cost

Answer 21

The cost a firm should incur for a process or activity.

Question 22

standard cost system

Answer 22

An accounting system in which standard, not actual, costs flow through the formal accounting records.

Question 23

ideal standard

Answer 23

A standard that reflects perfect implementation and maximum efficiency in every aspect of the operation.

Aka under perfect circumstances

Question 24

continuous-improvement standard

Answer 24

A standard that gets progressively tighter over time

Question 25

currently attainable standard

Answer 25

A level of performance that workers with proper training and experience can attain most of the time without having to exert extraordinary effort.

Question 26

authoritative standard

Answer 26

A standard determined solely or primarily by management.

Question 27

participative standard

Answer 27

A method of establishing standards whereby employees affected by the standards participate in the development of those standards.

Question 28

overtime premium

Answer 28

The excess wage rate per hour over the standard hourly wage rate.

Question 29

sales quantity variance

Answer 29

The product of three elements: (1) the difference between the budgeted and actual total sales quantity, (2) the budgeted sales mix of the product, and (3) the budgeted contribution margin per unit of the product.

It measures the effect of the change in the number of units sold from the number of units budgeted to be sold.

Sales quantity variance of a product = (total units of all products sold - budgeted total units of all products) x budgeted sales mix of the product x budgeted contribution margin per unit of the product

Question 30

sales mix

Answer 30

The relative proportion in which a company’s products (or services) are sold.

Question 31

sales mix variance

Answer 31

The product of the difference between the actual and budgeted sales mix multiplied by the actual total number of units of all products sold and by the budgeted contribution margin per unit of the product.

Sales mix variance = (actual sales mix of the product – budgeted sales mix of the product) x total units sold x budgeted contribution margin per unit of the product

Question 32

What are two contributing factors of the sales quantity variance?

Answer 32

Changes in the market size and the firms share of the market.

Question 33

market size variance

Answer 33

A measure of the effect of changes in the total market size on the firm’s total contribution margin

market size variance = (actual market size in units - budgeted market size in units) x budgeted market share x weighted-average budgeted contribution margin per unit