Flexible Budgets and Standard Costs

Flashcards describing key concepts, definitions, and terms related to flexible budgets and standard costs.

Fixed Budget

A budget based on one predicted amount of sales or other activity measure.

Flexible Budget

A budget based on more than one amount of sales or other activity measure.

Budget Reports

Reports that compare actual results to budgeted results.

Variance

The difference between actual performance and expected performance.

Standard Costing

A costing method that uses expected levels of performance for direct materials, direct labor, and overhead.

Favorable Variance

Occurs when actual costs are less than expected costs.

Unfavorable Variance

Occurs when actual costs are greater than expected costs.

Cost Variance

The difference between actual and standard costs.

Direct Materials Variance

The difference between the actual cost and standard cost of direct materials.

Quantity Variance

A variance that measures the difference in quantity of input used compared to what was expected.

Price Variance

A variance that measures the difference between actual price paid and standard price.

Overhead Variance

The difference between actual overhead costs and the budgeted overhead costs.