Chapter 21 Definitions

Front 1

1. Benchmarking

Back 1

practice of comparing and analyzing company financial performance or position with other companies or standards.

Front 2

2. Budget report

Back 2

report comparing actual results to planned objectives; sometimes used as a progress report.

Front 3

3. Budgetary control

Back 3

management used of budgets to monitor and control company operations.

Front 4

4. Controllable variance

Back 4

combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance.

Front 5

5. Cost variance

Back 5

difference between the actual incurred cost and the standard cost.

Front 6

6. Efficiency variance

Back 6

difference between the actual quantity of an input and the standard quantity of that input.

Front 7

7. Favorable variance

Back 7

difference in actual revenues or expenses from the budgeted amount that contributes to a higher income.

Front 8

8. Fixed budget

Back 8

planning budget based on a single predicted amount of volume; unsuitable for evaluations if the actual volume differs from predicted volume.

Front 9

9. Fixed budget performance report

Back 9

report that compares actual revenues and costs with fixed budgeted amounts and identifies the differences as favorable or unfavorable variances.

Front 10

10. Flexible budget

Back 10

budget prepared (using actual volume) once a period is complete that helps managers evaluate past performance; uses fixed and variable costs in determining total costs.

Front 11

11. Flexible budget performance report

Back 11

report that compares actual revenues and costs with their variable budgeted amounts based on actual sales volume (or other level of activity) and identifies the differences as variances.

Front 12

12. Management by exception

Back 12

management process to focus on significant variances and give less attention to areas where performance is close to the standard.

Front 13

13. Overhead cost variance

Back 13

difference between the total overhead cost applied to products and the total overhead cost actually incurred.

Front 14

14. Price variance

Back 14

difference between actual and budgeted revenue or cost caused by the difference between the actual price per unit and the budgeted price per unit.

Front 15

15. Quantity variance

Back 15

difference between actual and budgeted revenue or cost caused by the difference between the actual number of units and the budgeted number of units.

Front 16

16. Spending variance

Back 16

difference between the actual price of an item and its standard price.

Front 17

17. Standard costs

Back 17

costs that should be incurred under normal conditions to produce a product or component or to perform a service.

Front 18

18. Unfavorable variance

Back 18

difference in revenues or costs, when the actual amount is compared to the budgeted amount, that contributes to a lower income.

Front 19

19. Variance analysis

Back 19

process of examining differences between actual and budgeted revenues or costs and describing them in terms of price and quantity differences.

Front 20

20. Volume variance

Back 20

difference between two dollar amounts of fixed overhead costs; one amount is the total budgeted overhead cost, and the other is the overhead cost allocated to products using the predetermined fixed overhead rate.