Yeah GOALs!
Performance goals
Standards
The differences between actual and standard costs
Cost Variance
Red Line Railroad Inc has three support departments. Their customer support department is based on the number of customer contracts. CS Dept. has total expenses of $440,000 and generated 13,750 contracts. What is the allocation rate for the CS Dept?
Costs that can be influenced by the decisions of a manager
Controllable Expenses
The right or license granted to an individual or group to market a company’s goods or services
Franchise
These performance goals can be achieved only under perfect operating conditions
Ideal Standards
This occurs when the actual cost exceeds the standard cost
Unfavorable cost variance
This happens when the actual units produced is less than 100% of normal capacity
Unfavorable fixed FOH volume variance
A decentralized unit in which the department or division manager has responsibility for the control of costs incurred and the authority to make decisions that affect these costs
Cost Center
An expanded expression of return on investment (ROI) determined by multiplying the profit margin by the investment turnover
DuPont Formula
These performance goals can be attained with reasonable effort
Normal Standards
This occurs when the actual cost is less than standard cost
Favorable Cost Variance
Produced quantity= 5000 jeans
DL per hour per jean= 0.80
FOH rate= $6
What is the applied FOH
$24,000
A decentralized unit in which the manager has the responsibility and the authority to make decisions that affect both costs and revenues
Profit Center
A measure of managerial efficiency in the use of investments in assets, computed as operating income divided by invested assets
Return on Investment (ROI)
Performance goals that are too difficult to maintain in a dynamic manufacturing environment
Stale Standards
The difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced
Volume Variance
Actual: 900,000 lbs. at $2.75 per lb.
Standard: 916,000 lbs. at $2.70 per lb
What is the DM price variance
45,000 unfavorable
A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets invested in the center
Investment Center
The costs of services provided by an internal support department and assigned to profit centers based on the usage of the service by each profit center
Support Department Allocations
A process that normally requires the joint efforts of accountants, engineers, and other management personnel. The accountant converts the results of judgments and process studies into dollars and cents
Setting Standards
The difference between the actual variable overhead costs and the budgeted variable overhead for actual production
Controllable Variance
Actual: 900,000 lbs. at $2.75 per lb.
Standard: 916,000 lbs. at $2.70 per lb
What is the DM quantity variance
(43,200) Favorable
The process of measuring and reporting operating data by areas of responsibility
Responsibility Accounting
The excess of operating income over a minimum acceptable operating income
Residual Income