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15 Cards in this Set

  • Front
  • Back

(Responsibility center) Cost

Manager is only responsible for costs (paint dept. at an auto plant)

(Responsibility center) Revenue

Manager is only responsible for revenue (ticketing dept. at an airline)

(Responsibility center) Profit

Manager is responsible for both revenue & cost (individual restaurant in a franchise)

(Responsibility center) Investment

Manager is responsible for profit & investing decisions (exec. office)

Characteristics of variance

Set %/$ amount (10% of variance)

Characteristics of variance

Trends over time (variance slowly creeping toward set %)

Characteristics of variance

Controllability (only investigate variances we have control over changing)

Characteristics of variance

Pattern of recurrence (same variance each month)

Explain what a flexible budget is

Create a budget at all levels of activity to see where we may be if we op. at diff. levels & to give us opp. to compare act. costs to a bud. at act. level of activity

What variation (flexible budget) is based on

Helps us know cost variances were due to good cost control (or lack of) rather than inability to perform at anticipated level

Controllable costs

Only want to spend time on costs we have control over changing

Why are we concerned with controllable costs?

Want to know who has control so we know who to talk to if a change is needed

Information used in decision-making

(1) Relevant (2) Accurate (3) Timely

What is the purpose of a budget?

It creates a benchmark against which actual costs can be compred

Describe budgetary slack

Non-realistic estimate provided with intention that the manager will exceed "fake" estimate & get a potential bonus