Managerial Accounting Chapter 11

Front 1

standard cost

Back 1

a cost that management believes should be incurred to produce a good or service. refers to the cost of a single unit.

Front 2

budgeted cost

Back 2

refers to the total cost for the total number of units produced.

Front 3

formula for standard cost

Back 3

standard cost=
standard quantity x standard price

Front 4

standard quantity

Back 4

may be established for direct materials in engineering plans, recipes, or formulas

Front 5

standard price

Back 5

often determined from price lists provided by suppliers.

Front 6

how standard price (wage rate) for direct labor is established

Back 6

by management or through labor contracts.

Front 7

how standard quantity (hours)can be determined

Back 7

by time and motion studies or from historical data.

Front 8

predetermined overhead rate =

Back 8

(budgeted overhead costs) / (standard quantity of allocation base)

Front 9

ideal standards

Back 9

are developed under the assumption that nothing will go wrong. some managers feel this makes employees strive for perfection.

Front 10

attainable standards

Back 10

are developed under the assumption that a certain amount of defects and breakdowns are to be expected. most managers feel these are preferable.

Front 11

standard cost variance

Back 11

the difference between a standard and an actual cost

Front 12

variance analysis

Back 12

the division of a standard cost variance into two components.

Front 13

the variance is unfavorable when

Back 13

the actual cost is greater than the standard cost

Front 14

the variance is favorable when

Back 14

the actual cost is less than the standard cost

Front 15

material price variance

Back 15

the difference between the actual price paid per unit and the standard price paid per unit

Front 16

material price variance =

Back 16

([actual price per unit] - [standard price per unit]) x (actual quantity purchased)

Front 17

material quantity variance =

Back 17

([actual quantity used] x [standard price]) - ([standard quantity allowed] x [standard price])

Front 18

direct labor rate variance

Back 18

the difference between the actual hourly rate and the standard hourly rate times the actual hours worked

Front 19

direct labor variance =

Back 19

([actual hourly rate] - [standard hourly rate]) x (actual hours worked)

Front 20

direct labor efficiency variance

Back 20

the difference between the actual hours worked and the standard hours allowed for the number of units produced times the standard hourly rate

Front 21

direct labor efficiency variance =

Back 21

(AH-SH) x SR

([actual hours worked]-[standard hours allowed for total units produced]) x (standard hourly rate)

Front 22

material quantity variance

Back 22

the difference between the actual quantity of material used and the standard quantity of material allowed for the number of units produced times the standard price

Front 23

material quantity variance =

Back 23

(AQ-SQ) x SP

([actual quantity used]-[standard quantity allowed for the units produced]) x (standard price per unit)

Front 24

controllable overhead variance

Back 24

the difference between actual overhead and the amount of overhead that would be included in a flexible budget for the actual level of activity.

Front 25

controllable overhead variance =

Back 25

(actual overhead) - (flexible budgeted overhead for actual production level)

Front 26

overhead volume variance

Back 26

indicates whether the actual level of production was greater than or less than the level anticipated when the standard overhead rate was developed

Front 27

overhead volume variance =

Back 27

(flexible budgeted overhead for actual production level) - (overhead applied to production using the standard overhead rate)

Front 28

the financial impact of operating at a level other than planned capacity is measured by

Back 28

multiplying the difference in units by the unit contribution margin

Front 29

if a company utilizes more capacity than planned

Back 29

profits will increase

Front 30

if a company utilizes less cpacity than planned

Back 30

profits will decrease

Front 31

variances are indicators of

Back 31

potential problem areas

Front 32

it can be determined that costs are being effectively controlled

Back 32

only through investigation and the discovery of the root cause(s)

Front 33

management by exception

Back 33

approach in which only those variances deemed as significant are investigated.

Front 34

significance

Back 34

can be defined as an absolute dollar amount or as a percent of actual or standard cost