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30 Cards in this Set
- Front
- Back
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Flexible-budget
Favorable selling-price variance |
*Because of better quality product sold
*Because of overall increases in market price |
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Flexible-budget
Unfavorable variance for total variable costs |
*Used greater quantity of inputs (direct labor hours) relative to budgeted quantity of inputs
*Incurred higher prices per unit for the inputs (wage rate per direct labor hour) relative to budgeted price per unit of inputs |
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Think of variance analysis
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Providing suggestions for further investigation rather than as establishing conclusive evidence of good or bad performance.
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price variance
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Difference between actual price and budgeted price multiplied by actual input quantity
Sometimes called input-price variance or rate variance |
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Efficiency variance
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difference between actual input quantity used and budgeted input quantity allowed for actual output multiplied by budgeted price
sometimes called a usage variance |
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Value chain
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The sequence of business functions in which customer usefulness is added to products or services.
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Value chain steps
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Research and development
Design of products, services, or processes Production Marketing Distribution Customer service |
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Supply-chain
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The flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether it is inside or outside
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Key success factors
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Cost and efficiency
Quality Time Innovation |
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Key Success Factor:
Cost and efficiency |
Managers monitor the market price for goods and work to cut internal costs to meet necessary targets
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Key Success Factor:
Quality |
Total Quality Management
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Key Success Factor:
Time |
The time it takes to respond to customers and create new products and bring them to market.
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Key Success Factor:
Innovation |
A constant flow of innovative products or services is the basis for ongoing company success.
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Professional Ethics
Competence |
Ongoing professional development
Follow relevant laws and regulations Prepare clear and useful reporting |
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Professional Ethics
Confidentiality |
Refrain from disclosing, using or appearing to use confidential information except when authorized
Inform subordinates of confidentiality restrictions |
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Professional Ethics
Integrity |
Avoid conflicts of interest in fact or in appearance and maintain professional integrity
Avoid activities that would prejudice professional ethics Refuse gifts that would influence or appear to influence actions Follow companies legitimate ethical objectives Recognize and communicate irresponsible judgement Communicate both positive and negative opinions as needed Do not discredit the profession |
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Professional Ethics
Objectivity |
Communicate information fairly and objectively
Disclose fully all relevant information necessary for decision making by a reasonable person |
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Contribution Margin
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Contributes to recovering fixed costs
Revenues - variable costs |
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Contribution Margin Percentage
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Contribution Margin / Revenue
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Break-even point
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The point at which you cover all costs (expenses)
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Target Operating Income
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How many units must you sell to reach a target operating income.
Target Income = (SPx - VCx - FC) |
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Target Net Income and Income Taxes
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Target Net Income = Target Income / (1 - Tax Rate)
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Margin of Safety
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Budgeted Revenue - Break-even Revenues
May also be calculated in units |
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Margin of Safety %
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Margin of Safety / Budgeted Revenue
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Operating Leverage
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Effects that fixed costs have on changes in operating income as changes occur in units sold
Degree Operating Leverage = Contribution Margin / Operating Income |
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Sensitivity analysis
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"What-if" technique
What will operating income be if sales decrease by 5%? |
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Indifference Point
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VC1x + FC1 = VC2x + FC2
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Economic plausibility
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The relationship between the cost driver and the cost have some type of logical relationship and the relationship makes economic sense to the operating manager and the management accountant. High correlation does not establish an economically plausible relationship.
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The coefficient of determination (r2)
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Measures the goodness of fit
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Correlation coefficient (r)
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Measures the degree of the linear relationship between the dependent and independent variables. The value for r will be between –1 and +1. –1 means the two variables have a perfect negative relationship, +1 means a perfect positive relation-ship and 0 means no relationship at all.
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