Chapter 8 Flashcards
Benchmarking
Comparing processees and performance standards among competitors in the spirit of continuous improvement
Budget report
Contains relevant information that compares actual results to planned activities
Budgetary control
Refers to management’s use of budgets to monitor and control a company’s operations
Controllable variance
The difference between actual overhead costs incurred and the budgeted overhead costs based on a flexible budget
Cost variance
The difference between actual and standard costs
Efficiency variance
Occurs when standard direct labor hours (the allocation base) expected for actual production differ from the actual direct labor hours used
Favorable variance
When compared to budget, the actual cost or revenue contributes to a higher income. That is, actual revenue is higher than budgeted revenue, or actual cost is lower than budgeted cost
Fixed budget (Or static budget)
Based on a single predicted amount of sales or other measure of activity
Fixed budget performance report
Compares actual results for a budget period with the results expected under its fixed budget
Flexible budget (Or variable budget)
A report based on predicted amounts of revenues and expenses corresponding to the actual level of output
Flexible budget performance report
Lists differences between actual performance and budgeted performance based on actual sales volume or other activity level
Management by exception
Managers focus attention on the most significant differences between actual costs and standard costs and give less attention to areas where performance is reasonably close to standard
Overhead cost variance
Overhead cost variance (OCV) = Actual overhead incurred (AOI) - Standard overhead applied (SOA)
Price variance
Difference between actual price per unit of input and budgeted price per unit of input
Quantity variance
Difference between actual quantity of input used and budgeted quantity of input
Spending variance
Occurs when management pays an amount different than the standard price to acquire an item
