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23 Cards in this Set
- Front
- Back
What is a price variance?
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Subdivided from flexible-budget variance: Difference between an actual input price and a budgeted input price, multiplied by actual input quantity such as direct material purchased or used.
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What is a favorable variance?
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Has the effect of increasing operating income relative to the budgeted amount.
-For revenues, favorable means actual revenues > budgeted revenues. -For costs, favorable means actual costs are < than budgeted costs. - Calculated by doing: Actual result - Static-budget amount. |
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What is an unfavorable variance?
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Effect of decreasing operating income relative to the budgeted amount.
- Calculated by doing: Actual result - Static-budget amount. |
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What is a efficiency variance?
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The difference between the flexible budget and the "actual input at budgeted price."
(Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Budgeted price of input. |
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For absorption costing, what's different about beginning and ending inventory?
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For the ending inventory, you do the end inventory units x (Variable Manufacturing cost/unit + Fixed manufac. Cost/unit!)
- The VC/unit +FC/unit = new unit to use each year with ending inventory. |
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What is a significant difference between absorption costing and variable costing?
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One of the main differences is solely due to moving fixed manufacturing costs into inventories as inventories increase and out of inventories as they decrease.
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What is a variance?
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The difference between actual results and expected performance.
- Expected performance is also called budgeted performance. |
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What is a static budget?
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A master budget based on the level of output planned at the start of the budget period.
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For absorption costing, how do you find the allocated fixed manufacturing cost?
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1. Find the Fixed manufacturing cost per unit.
- Formula: Budgeted Fixed manufacturing cost/ Budgeted production units 2. Use the Fixed cost manufacturing cost/unit x Actual production units = Allocated fixed manufacturing cost. |
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What is absorption costing?
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A method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs.
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What is variable costing?
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A method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
- All fixed manufacturing costs and variable non-manufacturing costs are excluded from inventoriable costs and are instead treated as costs of the period in which they are incurred. |
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What is throughput costing?
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An extreme form of variable costing in which only direct material costs are included as inventoriable costs.
- All other costs are costs of the period in which they are incurred. Ex: Variable direct labor and overhead costs are period costs and deducted as expenses. |
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For throughput costing, how do you find the manufacturing costs and other operating costs?
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1. For manufacturing costs:
Use formula: (Variable manufacturing cost/unit x Units produced) + Fixed manufacturing cost - (Direct material cost/unit x units produced). 2. For operating cost: Formula: (Variable operating cost/unit sold x units sold) + Fixed operating costs. |
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What's the difference between the high-low method and the regression method?
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The regression method is more accurate than the high-low method because the regression equation estimates costs using information observations.
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What is the static-budget variance?
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Difference between the actual result and the corresponding budget amount in the static budget.
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What is a flexible budget?
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Calculates budgeted revenues and budgeted costs based on the actual output in the budgeted period.
- Prepared at the end of the period after actual output is known. Formula: ([Budgeted qty allowed x units produced] x Budgeted cost) |
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What is the sales-volume variance?
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The difference between the static-budget and the flexible budget amounts.
Because it arises solely from difference between actual output and budgeted output units. |
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What is a standard input?
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A carefully determined quantity of input - such as square yards of cloth or direct manufacturing labor-hrs.
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What is a standard price?
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A carefully determined price that a company expects to pay for a unit of input.
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What is a standard cost?
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Carefully determined cost of a unit of output - ex: Standard input allowed/output unit x Std. Price/input unit = Std. Cost/output unit for each variable direct-cost input.
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What's different about variable and fixed overhead?
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Variable overhead doesn't have a production-volume variance while fixed overhead doesn't have an efficiency variance.
Also for Fixed overhead: The actual qty. x budget price amount is equal to the flex. budget. This is called the Same budgeted lump sum regardless of output level. Formula for the ^ is: Budgeted qty. x budgeted price. Sometimes the budgeted qty. is made up of [Actual qty. units produced x Budgeted labor-hrs, kilos, etc.] - Only fixed overhead has a production-volume variance. |
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What's the items in order for an variable costing income statement?
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Revenues - Variable COGS: [Beginning inventory + Var. Manufacturing Costs = Cost of Goods Available for Sale - Ending inventory] - Variable Operating costs = Contribution Margin - Fixed manufacturing costs - Fixed non-manufacturing costs = Operating Income.
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For variable and fixed overhead, how do you find the allocated overhead?
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Formula: (Actual qty. x Budgeted rate.)
Actual qty can be made up of (budgeted labor-hrs/unit x actual units completed) Same as flexible budget number for Variable overhead. |