# Cost Accounting Ch 8

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1. Attainable standard
A performance criterion that recognizes inefﬁciencies that are likely to result from such factors as lost time, spoilage, or waste.
2. Balanced scorecard
A set of performance measures, both ﬁnancial and nonﬁnancial, that is used to evaluate an organization’s or a segment of an organization’s performance.
3. Budget variance (two-variance method)
The difference between budgeted factory overhead at the capacity attained and the actual factory overhead incurred.
4. Capacity variance
Reﬂects an under-or overabsorption of ﬁxed costs by measuring the difference between actual hours worked, multiplied by the standard over-head rate, and the budget allowance based on actual hours worked.
5. Controllable variance
The amount by which the actual factory overhead costs differ from the standard overhead costs for the attained level of production.
6. Efﬁciency variance
The difference between overhead applied (standard hours at the standard rate) and the actual hours worked multiplied by the standard rate; indicates the effect on ﬁxed and variable overhead costs when actual hours worked are more or less than standard hours allowed for the production volume.
7. Favorable variance
The difference when actual costs are less than standard costs.
A measure of the difference between the actual ﬁxed overhead and the budgeted ﬁxed overhead.
A measure of the difference between budgeted ﬁxed overhead and applied ﬁxed overhead.
10. Four-variance method
The analysis of ﬁxed and variable factory overhead costs based on the computation of a spending variance and an efﬁciency variance for variable costs and a budget variance and a volume variance for ﬁxed costs.
11. Ideal standard
A performance criterion that reﬂects maximum efﬁciency, with no allowance for lost time, waste, or spoilage.
12. Labor cost standard
A predetermined estimate of the direct labor cost required for a unit of product based on estimates of the labor hours required to produce a unit of product and the cost of labor per unit.
13. Labor efﬁciency (usage) variance
The difference between the actual number of direct labor hours worked and the standard hours for the actual level of production at the standard labor rate.
14. Learning effect
The process that occurs when employees become more efﬁcient at complex production processes the more often they perform the task.
15. Management by exception
As relates to variance analysis, it is the practice of examining signiﬁcant unfavorable or favorable differences from standard.
16. Materials cost standard
A predetermined estimate of the cost of the direct materials required for a unit of product.
17. Materials price variance
The difference between the actual unit cost of direct materials and the standard unit cost, multiplied by the actual quantity of materials used.
18. Materials quantity (usage) variance
The difference between the actual quantity of direct materials used and the standard quantity for the actual level of production at standard price.
19. Nonﬁnancial performance measures
These are performance measures that are used to evaluate operations, but that are not expressed in dollars, such as the percentage of defective units produced.
20. Price
In the context of variance analysis, refers to the cost of materials or the hourly wage rate for direct labor.
21. Spending variance
The difference between the actual factory overhead for variable costs and the actual hours multiplied by the standard variable rate. See also Budget variance.
22. Standard
A norm or criterion against which performance can be measured.
23. Standard cost accounting
A method of accounting for manufacturing costs that can be used in conjunction with either a job order or process cost accounting system. Standard costing makes it possible to determine what a product should have cost as well as what the product actually cost.
24. Three-variance method
The analysis of factory overhead costs based on the computation of efﬁciency, capacity, and budget (spending) variances.
25. Unfavorable variance
The difference when actual costs exceed standard costs.
26. Usage
The quantity of materials used or the number of direct labor hours worked.