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20 Cards in this Set
- Front
- Back
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Variance
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the difference between actual results and expected performance
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Budgeted performance
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expected performance
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Management by exception
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a practice whereby managers focus more closely on areas that are not operating aas expected and less on areas that are
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Static Budget AKA
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Master budget
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static budget based on
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level of output planned at the start of the budget period
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Static budget variance for operating income
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actual result - static budget amount
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Favorable variance |
actual costs are less than budgeted costs |
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Flexible budget |
calculates budgeted revenues and budgeted costs based on the actual output in the budget period |
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When is flexible budget calculated |
at the end of the period when managers know the actual output |
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Flexible budget AKA |
Hypothetical budet (the budget a company would have come up with if it had accurately predicted the level of output) |
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What stays the same and what differs between static budget and flexible budget? |
Same: -budgeted selling price -budgeted unit variable cost -total fixed cost Changes: -Level of output |
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Sales volume variance = |
flexible budget - static budget |
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Flexible budget variance = |
actual result - flexible budget amount |
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Selling price variance = |
( actual - budgeted ) X Actual selling price selling price units sold |
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Efficiency variance |
difference between actual input quantity and budgeted input quantity |
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Efficiency Variance = |
(actual quantity - Budgeted quantity) X Budgeted of input used of input allowed for price of actual output input |
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List the causes of variances |
-Poor design of products or processes -poor work in production line becasue of underskilled workers or faulty machines -congestion due to scheduling a large number of rush orders -suppliers not manufacturing materials of uniform high quality |
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effectiveness |
the degree to which a predetermined objective or target is met, such as the sales, market share, and customer satisfaction ratings |
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efficiency |
the relative amount of inputs used to achieve a given output level. For example, the smaller the quantity of arabica beans used to make a given number if VIA packets or the greater the number of VIa packets made from a given quantity of beans, the greater the efficiency |
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Benchmarking |
the cotinuous process of comparing your firm's performance levels against the best levels of performance in competing companies or in companies that have similar processes |
