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25 Cards in this Set

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benchmarking

= evaluating




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

budget report

report comparing actual results to planned objectives

what limits usefulness to managers of fixed budget performance reports



does not reflect differences that occur simply because actual volume is different from budgeted volume.




This is a serious limitation when evaluating the reasonableness of actual revenues and costs.

fixed budget


vs


flexible budget

The whole idea between fixed and flexible is that you must re-classify the expenses. From COGS and Exp to variable expenses and fixed expenses.




Fixed: sales - COGS - EXP = OI


Flexible: Sales - VC = CM - FC = OI

chart, fixed budget

FIXED BUDGET


units Q


Sales $


-COGS


-Expenses


=OI



chart, flexible budget

FLEXIBLE BUDGET


= contribution margin format


(list q in columns)


sales


VC


CM


FC


IO

variable budget

same thing as flexible budget

main purpose of flexible budget

flexible budget


to help managers better evaluate past performance, which can improve their abilities to monitor and control operations

flexible budgets


vs


flexible budget performance report

flex budget: shows budget for more than one Q




Flex budget PERF REPORT: compares flex budget for actual Q vs actual results, includes variances

correct titling for flexible budget performance report

XYZ Company


Flexible Budget Performance Report


For Year (period) Ended December 31, 2013

what is a standard cost card

includes DL, DM and OH


the expected, or budgeted, cost.


it is the estimated cost per unit

management by exception

focusing on the most significant variances for analysis and action strategies.




less attention given to areas where performance is close enough to the standard

ideal standard vs practical standard

ideal standard = quantity of material used if manufacturing is 100% efficient




practical standard = also takes into account a reasonable amount of efficiency

why is there a cost card

A cost card has the estimated (budgeted) cost per item to manufacture. It includes DL/unit, DM/unit and OH/unit.




It is needed for manufacturing statement.

how to change from fixed budget report to flexible budget performance report

use fixed budget Q to find VC/unit


use fixed budget to find total FC


Write in CM format


Use actual Q in flexible budget column (with budgeted VC/unit and budgeted FC)


Use actual costs in actual column



usefulness of flexibility budgeting

A FBPR is useful for variance analysis.




VA = the difference between actual performance and budgeted performance




- important that the budgeted and actual results are based on the same level of activity

in what way is a VC considered constant?

VC is constant per unit cost.




(within the relevant range)

what dept is usually responsible for labor rate variance

The human resource department is usually responsible for a labor rate variance.

what dept is usually responsible for labor efficiency variance

The production department is usually responsible for a labor efficiency variance.

why have standard costs

to have a basis to assess the reasonableness of actual costs.




standard costs v. actual costs helps management identify differences and pursue why

what is a standard cost card

record that has standard cost information.




DL, DM, and OH

management by exception

managing by focusing on large differences from standard costs

standard cost

preset cost for delivering s product or service under normal conditions

ideal standard

quality of inout required if a production is 100 % efficient

practical standard

quantity of input under normal conditions