Vocabulary
The difference between a budgeted and actual amount
What is a variance?
Based on the level of planned output.
What is the static budget?
The difference between the actual result and the corresponding budgeted amount in the static budget.
What is the static-budget variances?
Overhead Control xx
Accounts payable and various other accounts xx
What is to record actual overhead costs incurred?
What is a standard cost?
What is a carefully determined cost used as a benchmark for judging performance.
Has the effect, when considered in isolation, of increasing operating income relative to the budgeted amount.
What is a favorable variance?
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Does not exist for Variable Manufacturing Overhead
What is the Production-volume variance?
A debit to Work-in-Process Control and a credit to Overhead Allocated denotes _________?
What is the recording of overhead cost allocated?
Describe benchmarking
What is the continuous process of comparing a firm's performance against the best levels of performance in competing companies or companies with similar processes?
Calculated by dividing the budgeted variable/fixed overhead costs by the denominator level of the cost-allocation base
What is the variable/fixed overhead cost rates?
Considered the hypothetical budget that would have been prepared at the beginning of the budget period if the actual output had been known.
If the actual OI is $100,000
The flexible budget OI is $88,000 and
The Static budget OI is $108,000 then
The Sales-Volume Variances must be _______?
What is $20,000 U?
If the variable overhead spending variance is $4,400 F, and the efficiency variance is 16,000 U, what is the journal entry to write-off the variances if it is deemed immaterial?
What is
Cost of Goods Sold 11,600
Variable Overhead Spending Variance 4,400
Variable Overhead Efficiency Variance 16,000
Why are variances important to managers?
What is variances are important to managers because they use them to make decisions about control, performance evaluation, organization learning, and continuous improvement?
A practice where managers focus more closely on areas that are not operating as expected and less closely on areas that are.
What is management by exception?
What budgets make up the Master budget?
What are the operating (revenues, production, direct materials, direct labor, manufacturing overhead, cost of goods sold, operating expense and budgeted income statement) and financial budgets (capital expenditures, cash, budgeted balance sheet, budgeted statement of cash flows)?
Actual Budget
units 30,000 32,000
Selling price $90 $85
What is the Selling price variance?
What is $150,000 F?
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The static budget variance can be sub-divided into what two variances, what are they?
What are the flexible-budget and sales-volume variances?
The difference between the actual variable overhead cost per unit of the cost-allocation base and the budgeted variable overhead cost per unit of the cost-allocation base, multiplied by the actual quantity of variable overhead cost-allocation base used
What is the variable overhead spending variance?
A company forecast sales of 15,000 and selling price of $120. Actual sales revenue amounted to $1,812,500 ($125 selling price). What is the flexible budget amount?
What is $17,400,000?
Direct Materials Purchases and Used: Actual units = 10,000 Square yards of material purchased/used 25,500 Actual price incurred per square yard $ 32 Direct material costs $210,000
Direct Manufacturing Labor Used: Budgeted information: 11,000 units 2.5 sq. yards/unit $30/sq. yard
The efficiency variance is _________?
What is $15,000 U?
Using the following information is: direct labor hours = 3,250 actual price = $ 20.40/hr budgeted labor hours per unit = 1.5 hours budgeted price = $20.00/hr budgeted units = 2000
What is the journal entry to record the direct labor variances?
What is
Work-in-Process Control 60,000 Direct Man. Labor Price Variance 1,300 Direct Man. Labor Efficiency Variance 5,000 Wages Payable Control 66,300
What are the reasons for the calculation of price and efficiency variables? Explain
What is they help managers to judge performance? The price variance helps to explain variance due to the difference in price and the efficiency variance helps to explain the difference in budgeted and actual material/labor usage.