module 23 Flashcards
responsibility accounting
The structuring of performance reports to
emphasize the factors controlled by units or
managers
▪ Most include comparisons of actual results with
budgeted amounts
types of responsibility centers
cost center, revenue center, profit center, investment center
cost center
A responsibility center whose manager is
responsible only for managing costs
revenue center
A responsibility center whose manager is
responsible for the generation of sales revenues
profit center
A responsibility center whose manager is
responsible for revenues, costs, and resulting profits
investment cente
A responsibility center whose manager is
responsible for the relationship between its
profits and the total assets invested in the center
static budget
Based on original
operating budget
▪ Constant, regardless
of actual activity
flexible budget
Set for a series of
possible production and
sales volumes, or
▪ Adjusted to a particular
level of production
▪ Used to determine what
costs should be for a
particular activity level
a standard cost
Indicates what it should cost to provide an activity
or produce one batch or unit of product under
planned and efficient operating conditions
Standard cost variance analysis
Provides a system for examining the flexible budget
variance
▪ Difference between actual costs and flexible budget cost of
producing a given quantity of product or service
actual costs
Determined from
financial transactions
flexible budget costs
Determined by multiplying standard
quantities allowed for the output times
standard price or rate
Standard price
Indicates how much should be paid for each input
unit of direct materials
▪ Input is the measurement of raw materials, such as
pounds, yards, grams, etc.
standard quality
Indicates the amount of direct materials allowed to
produce one unit of product
▪ Output is quantity of finished goods produced
