Chapter 11

Front 1

What is control?

Back 1

1) acting to implement the planning decision; 2) observing the plans at work; 3) gathering feedback to assess the performance of the plans; 4) determining corrective action, if any; and 5) implementing any corrective measures.

Front 2

What is a performance report?

Back 2

the primary control tool. It compares the actual results to the budgets and lists differences.

Front 3

What are flexible budgets?

Back 3

Give the costs that should be incurred given different levels of production.

Front 4

The master budget is usually a static budget prepared for an.....

Back 4

expected level of output.

Front 5

Effectivness and efficiency...what does each one ask?

Back 5

Effectivness: Did we meet the goal?
Efficiency: How well did we use the resources?

Front 6

Performance analysis....

Back 6

comparison of actual and budgeted data, is an improved control tool if flexible budget data is used.

Front 7

What are variances?

Back 7

Differences.

Front 8

What are standard costs?

Back 8

Realistically predetermined costs for direct materials, direct labor, and manufacturing overhead.

Front 9

Standard costs are based on....

Back 9

engineering estimates, forecasted demand, worker input, time and motion studies, and direct materials types and quantities.

Front 10

Standard costs are useful for...

Back 10

preparing operating budgets, controlling production costs, setting realistic prices, and simplifying accounting procedures for inventories and product costing.

Front 11

Standard costs are useful for what kind of costing?

Back 11

Product costing. All transactions affecting the three inventory accounts (materials, work in process, and finished goods) and cost of goods sold are recorded using standard costs rather than actual costs incurred.

Front 12

What are ideal standards?

Back 12

Those that can be attained only under the best circumstances.

Front 13

What are practical (normal) standards?

Back 13

Rigorous but attainable.
*they allow for normal machine downtime and employee rest periods.
*Realistic. Therefore, practical standards are used for variance calculations, planning and forecasting.

Front 14

What is a standard?

Back 14

Unit amount whereas a budget is a total amount.

Front 15

Standard direct materials cost=

Back 15

standard price for direct materials X standard quantity for direct materials

Front 16

Standard direct labor cost=

Back 16

Standard wage for direct labor X standard hours of direct labor

Front 17

Price variance=

Back 17

actual price-standard price X actual quantity

Front 18

Quantity variance=

Back 18

actualy quantity-standard quantity X standard price

Front 19

total (budget) variance=

Back 19

price variance + quantity variance

Front 20

In economic terms, a wae rate is the ___ of labor. Hours is a ____.

Back 20

price, quantity measure

Front 21

price (rate) variance=

Back 21

actual rate-standard rate X actual hours

Front 22

quantity (efficiency) variance=

Back 22

actual hours-standard hours allowed X standard rate

Front 23

total (budget) variance=

Back 23

rate (price) variance + efficiency (quantity) variance

Front 24

A negative result from a variance calculation means....

Back 24

under budget

Front 25

Standard hours allowed (standard quantity allowed)

Back 25

is a flexible budget calculation. Given that the firm produced a given number of units, how many hours should it have taken?

Front 26

Labor variances....

Back 26

usually result from paying workers higher wages than expected and misallocation of workers.

Front 27

What are potential problems with the usage of standard costs?

Back 27

1) Standard cost variance reports may not be timely
2) Managers who are insensitive may use variance reports as a club and undermine morale

Front 28

Labor quantity and efficiency variances make two important assumptions.

Back 28

1) They assume that the production process is labor paced. However in some campanies output is determined by processing speed of machines.
2) The computations assume labor is a variable cost.Due to contracts with labor unions and other factors, it may be a fixed cost.

Front 29

In some cases, a favorable variance can be....

Back 29

as bad or worse than an unfavorable variance (for example, undersized hamburgers)

Front 30

There may be a tendancy with standard cost reporting systems to emphasize.....

Back 30

meeting the standards to the exclusion of other important objectives such as maintaining and improving quality, on time delivery, and customer satisfaction.

Front 31

Just meeting standards may not be sufficient. ___ improvement may be necessary.

Back 31

Continual

Front 32

Computing standard unit costs for overhead involves two formulas.

Back 32

1) Standard variable overhead rate= total budgeted variable OH costs/ denominator activity
2) Standard fixed overhead rate= total budgeted fixed OH costs/ denominator activity

Front 33

That is the denominator activity?

Back 33

Sometimes called normal capacity (denominator hours or normal hours or expected hours).The denominator activity can be direct labor hours, machine hours, units or product, or other measures.

Front 34

There should be a casual relationship between the

Back 34

denominator activity (activity base) and overhead costs. In other words, the denominator activity should be a cost driver.

Front 35

The denominator activity should not be expressed in

Back 35

dollars or any other currency.

Front 36

The denominator activity should be

Back 36

simple and easily understood.

Front 37

Unfavorabl variances denote

Back 37

underapplied overhead

Front 38

Favorable variances denote

Back 38

overapplied overhead

Front 39

The total overhead variances represents...

Back 39

the difference between how much should have been spent according to the flexible budget and how much was actually spent.

Front 40

A controllable variance may occur simply because

Back 40

of price increases over what is shown in the flexible budget.

Front 41

However, the controllable variance also may be caused

Back 41

by waste or excessive usage of overhead items. The supervisor probably has some control over waste of supplies and similar items.

Front 42

Fixed costs are often included in the

Back 42

flexible budget

Front 43

The volume variance is a measure

Back 43

of utilization of plant facilities.

Front 44

If the denominator activity and the standard hours allowed for the output of the period are the same,

Back 44

then there is no volume variance.

Front 45

If the denominator activity is greater than the standard hours allowed for the output of the period,

Back 45

then the volume variance is unfavorable, signifying an under utilization of available facilities.

Front 46

If the denominator activity is less than the standard hours allowed for the output of the period,

Back 46

then the volume variance is favorable, signifying a better utilization of available facilities than was planned.

Front 47

Exressing fixed costs on per hour basis is somewhat artificial. By definition, changes in activity within the relevant range have no effect on

Back 47

total fixed costs.

Front 48

What is a balanced scorecard?

Back 48

Evaluates a companies performance from a series of perspectives.

Front 49

Four commonly employed perspectives are

Back 49

financial, customer, internal process, and learning and growth.