D&C 2 Flashcards
Overhead absorption rate formula
total production overheads/ total activity level
what is a trend
a trend is a movement of a time series over a long period of time
what is a time series
a time series is a series of figures or values recorded over time
what is a seasonal variations
a seasonal variation is a predicted movement away from the trend
what is a cyclical variation
a cyclical variation is a recurring pattern over a long period of time
what is a random variation
an random variation is an irregular variation due to rare or chance occurences
Limitations of index number
The index must be regularly revised
New products/items may be discontinued
The base year needs to be reviewed periodically
Interpolation/extrapolation
Interpolation-forecasts data within the historical data range
Extrapolation-forecasts data outside of the historical data range
limitations of forecasting
forecasts from historical data would be accurate, but the actual future results may be different from the forecast figures
forecast figures are based on the assumptions that current conditions will continue in the future
if a forecast is based on a trend, there are always elements or variations which cause the trend to change
what is standard costing
standard costing is a system where production costs are recorded for standard products. each unit is expected to use the same quantity and requires the same time to make
what are ideal standards
ideal standards are set on the basis that perfect working conditions apply at all times
what are target/attainable standards
target standards are realistically achievable but allow normal wastage and inefficiency
what are normal standards
basic standards are based on current working conditions which have not changed over time.
what is the total variable overhead variance
this compares the standard variable overhead cost for actual production unit to the actual variable overhead cost for actual production unit
what is the variable overhead expenditure variance
this compares the standard variable overhead cost of actual hours worked to the actual variable overhead cost of actual hours worked
what is the variable overhead efficiency variance
this compares the standard hours for actual production units to the actual hours for actual production units
what is fixed overhead expenditure variance
used when greater or fewer units were produced than expected
this compares the budgeted and actual fixed overhead expenses
what is the variable overhead efficiency variance
this compares the standard hours fro actual production units to the actual hours for actual production units valued at the standard rate
what is the idle time variance
this compares actual hours worked and actual hours paid, valued at the standard rate per labour hour
what is the fixed overhead volume variance
this compares the budgeted and actual units produced valued at the standard OAR unit
causes of variance- idle time
idle time is always adverse.
the workforce may be unproductive due to machine breakdowns, illness or injury,materials delivered late
causes of variance- fixed overhead expenditure
favourable
savings in cost/ change of supplier
adverse
overall increase in the cost or service used
causes of variance- fixed overhead volume
favourable
production or level of activity greater than budgeted
adverse
production or level of activity less than budgeted(fewer units that foh can be spread over)
what is an uncontrollable variance
this is part of the variance which is from a cause outside the control of the manager responsible
what is is a controllable variance
this is part of a variance that is due to controllable operational factors or decisions
what is interdependence of variance
reasons for two or more variances may be the same. the factor which causes one variance can cause the other too
Advantages of target costing
Improved sales volume and market share Better relationships with customers Planned level of profit is achievable More efficient use of resources Improvement in production methods
Advantages of target costing for the customer
The product or service is attainable at the right price
Better relationship with the supplier as they are more reliable
Prices are reduced without losing quality
Name all the stages of the product life cycle
Development Launch Growth Maturity Decline
Benefits of standard costing
Planning
Control
Decision making
What is an uncontrollable variance
An error made in the planning of the standard costs.
What is a controllable variance
The element within the managers control
