Chapter 22

Question 1

achievable standards

Answer 1

A standard that takes into account normal spoilage and inefficiency; intended to allow workers to reach the established benchmarks.

Question 2

balanced scorecard

Answer 2

A set of performance measures that are congruent with assessing improvement in financial, customer, and business process outcomes.

Question 3

centralized decision making

Answer 3

A business style where top leaders make and direct most important decisions

Question 4

common fixed costs

Answer 4

Fixed costs that are incurred to support more than one business unit

Question 5

cost center

Answer 5

An area of responsibility under the control of a manager who is responsible for costs incurred within the unit generally has little revenue function

Question 6

decentralized decision making

Answer 6

A business style where top leaders concentrates on strategy, and leaves day-to-day operation and decision-making tasks to lower-level personnel

Question 7

direct labor efficiency variance

Answer 7

A variance comparing standar hours of direct labor to the actual hours worked; measured at the standard rate per hour [9standar hours - actual hours) X standard rate]

Question 8

direct labor rate variance

Answer 8

A variance that reveals the difference between the standard rate and actual rate for the actual labor hours worked [(standar rate - actual rate) X actual hours]

Question 9

fixed overhead spending variance

Answer 9

A fixed overhead variance that compares actual fixed overhead to the budgeted fixed overhead.

Question 10

fixed overhead volume variance

Answer 10

A fixed overhead variance that compares the budgeted fixed overhead to the fixed overhead that is applied to production based on standard fixed overhead per unit of output.

Question 11

ideal standards

Answer 11

A standard that could only be achieved under perfect operating conditions; such standards are rarely expected to be achieved.

Question 12

investment center

Answer 12

A evaluative unit where managers are accountable for cost and profit outcomes, including consideration of the amount of capital that is deployed to achieve those outcomes.

Question 13

management by exception

Answer 13

A management focus of attention on areas where corrective measures appear necessary.

Question 14

materials price variance

Answer 14

A variance that reveals the difference between standard price for materials purchased and amounts actually paid for those materials [(standard price - actual price) X actual quantity].

Question 15

materials quantity variance

Answer 15

A variance comparing standard quantity to actual quantity of materials; variation is measured at the standard price per unit [(standard quantity - actual quantity) X standard price].

Question 16

profit center

Answer 16

Business unit that has control over both costs and revenues and is therefore evaluated on the profit outcomes.

Question 17

responsibility center

Answer 17

The part of an organization under the control of a manager.

Question 18

return on investment

Answer 18

ROI: A model consisting of a margin component (Operating Income/Sales) and turnover component (Sales/Average Assets); reduces to Operating Income/Average Assets.

Question 19

standard cost

Answer 19

A measure of what costs should be incurred to achieve the observed output

Question 20

traceable fixed costs

Answer 20

Fixed costs that would not exist if the unit under evaluation ceased to exist

Question 21

variable overhead efficiency variance

Answer 21

A variance that reflects the level of efficiency associated with the application of variable overhead to production

Question 22

variable overhead spending variance

Answer 22

A variance that reflects the difference between actual variable overhead and standard variable overhead associated with the actual units of the application base.