Ch 7 Flashcards
How does static-budget variance analysis mislead those assessing actual performance against pro forma performance indicators?
Static budget variance can mislead by showing unfavorable costs when production and sales exceed expectations, causing managers to waste time on routine cost analysis.
What is the relationship between management by exception and variance analysis?
Management by exception focuses on areas not meeting expectations, with variance analysis helping identify those areas.
Distinguish between a favourable variance and an unfavourable variance.
A favorable variance increases operating income, while an unfavorable variance decreases it, compared to the budgeted amount.
3 reasons for a UF direct manufacturing labour efficiency variance.
Inefficient scheduling
Hiring/use of underskilled
Poor maintenance
When benchmarking
Comparisons highlight areas for improved cost management
Bench marking process
Assesses external and internal conditions and match with those of the benchmarked company
The process in which a company’s products or services are measured relative to the best possible levels of performance is known as
benchmarking.
In a journal entry for a standard costing system that records favourable variances, to increase the relevant variance account _______.
the variance account must be credited
When a journal entry is made to record the direct materials used, a debit to the Direct Materials Efficiency Variance _______.
Variance Unfavorable
