Cost accounting 11.txt

Comparison of actual with standard input amounts and prices

Difference between budgeted and actual results due to differences between budgeted and actual inputs per unit of output

Standard price x (actual quantity - (standard quantity x actual volume))

Variance that, taken alone, results in an addition to operating profit

Budgets of financial resources

Example: cash budget, budgeted balance sheet

Budget that indicates revenues, costs, and profits for different levels of activity

Generated at the end of the year based on actual sales and production volume, and manufacturing standards

Helps identify source of a variance

Expected monthly costs at different output levels (Estimated cost-volume line)

Standard input price x standard input quantity allowed for actual output

Aka flexible budget amount

Management practice by which managers focus on collecting observed variances (measure different variances, compare them, and find reasons for exceptional differences)

• Budgeted income statement
• Production budget
• Budgeted cost of goods sold
• Supporting budgets

Difference between budgeted and actual costs due to changes in cost of inputs

(actual price - standard price) x actual quantity

Variance due to difference between budgeted and actual volume used to allocate fixed costs

Analysis of causes of differences between budgeted and actual profits

• Difference between the operating profits in the master and flexible budget due to difference in budgeted and actual sales volume
• Aka sales volume variance

• Difference between actual revenue and revenue of actual units sold at budgeted sales price
• (what company thought it could sell for vs. which price product actually sold for)

Actual revenue - (actual units sold x budgeted selling price)

Price variance for fixed overhead

Form providing:

- standard quantities of inputs used to produce one unit of output

- standard prices for inputs

Accounting method that signs costs to cost objects at predetermined amounts

• Budget for one single activity level
• Usually the master budget
• Created at the beginning of the year using estimated sales and production volume, and manufacturing standards

Difference between budgeted and actual results

= price variances + efficiency variances

Variance that, taken alone, reduces operating profit

• Difference between budgeted and actual outcome
• Useful in explaining differences between actual and budgeted income

Actual amount - budgeted amount = variance

• Price standard: expected price paid
• Input standard: expected units/ amount of input

Standard quantity of input x actual volume

(= standard input quantity allowed for actual output)

• Difference between budgeted cost and actual cost for actual output
• Combination of price and efficiency variances

(actual price x actual quantity) - (standard price x standard quantity x actual volume)

Analysis of differences between actual and budgeted performance

• Used to:
• 1. Evaluate performance of individuals and business units
• 2. Identify possible sources of deviations of actual from budgeted performance