Variance Analysis & Managing Cost

Flashcards about variance analysis and capacity management.

__ costing is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable (product) costs.

Variable

__ costing is a method of inventory costing in which all variable and fixed manufacturing costs are included as inventoriable (product) costs.

Absorption

__ costing is a method of inventory costing in which only direct materials are included as inventoriable (product) costs.

Throughput

US GAAP requires __ costing for external reporting.

absorption

In _ costing, DL and total MOH are treated as an expensed (period) cost.

Variable

Producing for inventory is justified when a firm’s managers anticipate rapid growth in __ and want to produce and store additional units to deal with possible production shortages in the next year.

demand

__ costing (super-variable costing) is a method of inventory costing in which only direct material costs are included as inventory costs. All other product costs are treated as period expenses.

Throughput

A __ demand spiral is the continuing reduction in the demand for its products that occurs when competitor prices are not met, demand drops further and the fixed costs are spread over fewer units, resulting in greater and greater costs per unit.

downward

For product costing and capacity management, using __ as the denominator level sets the cost of capacity at the cost of supplying the capacity, regardless of demand for the capacity.

practical capacity

__ capacity is the level of capacity based on producing at full efficiency all the time.

Theoretical

__ capacity is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions like scheduled maintenance time and shutdowns for holidays.

Practical

__ capacity utilization is the level of capacity utilization that satisfies average customer demand over a period that is long enough to consider seasonal, cyclical, and trend factors.

Normal

__ capacity utilization is the level of capacity utilization that managers expect for the current budget period which is typically one year.

Master-budget