Vocab | Chap 10: Standard Costing and Variance Analysis

Control limits

the maximum allowable deviation from a standard.

Favorable (F) variances

variances produced whenever the actual amounts are less than the budgeted or standard allowances.

Fixed overhead spending variance

the difference between the actual fixed overhead (AFOH) and the budgeted fixed overhead (BFOH).

Fixed overhead volume variance

the difference between budgeted fixed overhead (BFOH) and applied fixed overhead.

Labor efficiency variance (LEV)

the difference between the actual direct labor hours used and the standard direct labor hours allowed multiplied by the standard hourly wage rate.

Labor rate variance (LRV)

the difference between the actual hourly rate paid and the standard hourly rate multiplied by the actual hours worked,

Materials price variance (MPV)

the difference between the actual price paid per unit of materials and the standard price allowed per unit multiplied by the actual quantity of materials purchased.

Materials usage variance (MUV)

the difference between the direct materials actually used and the direct materials allowed for the actual output multiplied by the standard price.

Price (rate) variance

the difference between the actual and standard unit price of an input multiplied by the number of inputs used.

Price standards

the amount that should be paid per unit of the input to be used.

Quantity standards

the amount of input that should be used per unit of output.

Standard cost per unit

the per-unit cost that should be achieved, given materials, labor, and overhead standards.

Standard cost sheet

a listing of the standard costs and standard quantities of direct materials, direct labor, and overhead that should apply to a single product.

Standard hours allowed (SH)

the direct labor hours that should have been used to produce the actual output (Unit labor standard × Actual output).

Standard quantity of materials allowed (SQ)

the quantity of materials that should have been used to produce the actual output (Unit materials standard × Actual output).

Target cost

the difference between the sales price needed to achieve a projected market share and the desired per-unit profit.

Total budget variance

the difference between the actual cost of an input and its planned cost.

Unfavorable (U) variances

variances produced whenever the actual input amounts are greater than the budgeted or standard allowances.

Usage (efficiency) variance

the difference between standard quantities and actual quantities multiplied by standard price.

Variable overhead efficiency variance

the difference between the actual direct labor hours used and the standard hours allowed multiplied by the standard variable overhead rate.

Variable overhead spending variance

the difference between the actual variable overhead and the budgeted variable overhead based on actual hours used to produce the actual output.