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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) |
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(Responsibility center) Revenue |
Manager is only responsible for revenue (ticketing dept. at an airline) |
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(Responsibility center) Profit |
Manager is responsible for both revenue & cost (individual restaurant in a franchise) |
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(Responsibility center) Investment |
Manager is responsible for profit & investing decisions (exec. office) |
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Characteristics of variance |
Set %/$ amount (10% of variance) |
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Characteristics of variance |
Trends over time (variance slowly creeping toward set %) |
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Characteristics of variance |
Controllability (only investigate variances we have control over changing) |
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Characteristics of variance
|
Pattern of recurrence (same variance each month) |
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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 |
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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 |
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Controllable costs |
Only want to spend time on costs we have control over changing |
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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 |
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Information used in decision-making |
(1) Relevant (2) Accurate (3) Timely |
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What is the purpose of a budget? |
It creates a benchmark against which actual costs can be compred |
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Describe budgetary slack |
Non-realistic estimate provided with intention that the manager will exceed "fake" estimate & get a potential bonus |