chap 9 10 11 Flashcards
is a detailed quantitative plan for
acquiring and using financial and other resources
over a specified forthcoming time period.
budget
act of preparing a budget is
budgeting
use of budgets to control an
organization’s activities
budgetary control
involves developing
objectives and
preparing various
budgets to achieve
those objectives.
Planning
involves the steps taken by
management to increase
the likelihood that the
objectives set down while
planning are attained and
that all parts of the
organization are working
together toward that goal.
CONTROL
ordinarily cover a one-year period corresponding to a company’s fiscal year. Many companies divide their annual budget into four quarters.
Operating budgets
is a 12-month budget that rolls
forward one month (or quarter)
as the current month (or quarter)
is completed.
continuous budget
is a budget that is
prepared with the full cooperation and participation of managers
at all levels.
self-imposed budget or participative budget
must be adequate to meet budgeted sales and to provide for the desired ending inventory.
production budget
are benchmarks or “norms” for measuring performance.
standards
specify how much of aninput should be used tomake a product orprovide a service
quantity standards
specify how much should be paid for each unitof the input.
cost ( price ) standards
Deviations from standard considered significant are brought to the attention of management, a practice known as
management by exception
Often a singlerate is used that reflectsthe mix of wages earned.
RateStandards
Use time and motion studies foreach labor operation.
TimeStandards
The rate is the variable portion of the predetermined overhead rate.
RateStandards
The activity is the base used to calculate the predetermined overhead.
ActivityStandards
is set for total costs.
budget
is a per unit cost, are often used when preparing budgets.
Standards
Difference betweenactual price and standard price
price variance
Difference betweenactual quantity andstandard quantity
quantity variance
The actual price is used to compute the quantity variance so that the production manager is not held responsible forthe purchasing manager’s performance.
false
Production managers areusually held accountablefor labor variances
true
is the elapsed time from when a customer order is received to when the completed order is shipped.
Delivery cycle time
is the amount of time required to turn raw materials into completed products. This includes process time, inspection time, move time, and queue time.
Throughput (manufacturing cycle) time
are prepared fora single, plannedlevel of activity.
Static budgets
Performance evaluation is difficult when actual activity differs from the planned level of activity.
true
If flexible budgetis based onactual hoursOnly a spendingvariance can becomputed.
true
If flexible budgetis based onstandard hours
Both spendingand efficiencyvariances can be computed.
true
Results from paying moreor less than expected foroverhead items and from excessive usage ofoverhead items.
spending variance
Controlled bymanaging theoverhead cost driver.
efficiency variance
, overhead isapplied to work inprocess based onthe actual numberof hours workedin the period.
normal cost system
overhead isapplied to work inprocess based onthe standard hoursallowed for the outputof the period.
standard cost system
Results from spendingmore or less thanexpected for fixedoverhead items.
budget variance
Results when standard hoursallowed for actual output differsfrom the denominator activity
volume variance
does not measure over- or under spending.It results from treating fixedoverhead as if it were avariable cost.
volume variance
