Managerial Accounting: Chapters 9, 10, and 11 Review

Vocabulary flashcards covering key definitions, formulas, and concepts from Chapters 9, 10, and 11, including master budgeting, flexible budgets, standard costing, variance analysis, and the balanced scorecard.

Budget

A formal written statement of management's plans for a specified future period, expressed in financial terms.

Participative Budgeting

A bottom-to-top budgeting approach that invites managers at different levels to help prepare the budget.

Budgetary Slack

The practice of understating expected revenue or overstating expected costs to make a budget easier to achieve.

Continuous (Rolling) Budget

A budget that keeps looking a full year ahead as each period ends.

Master Budget

A set of interrelated budgets forming a plan of action for a specified period, consisting of operating budgets and financial budgets.

Sales Budget

The first budget prepared in the master budget process, which determines expected sales revenue and drives required production.

Production Budget Formula

$$\text{Expected sales units} + \text{Desired ending finished goods units} - \text{Beginning finished goods units} = \text{Required production units}$$

Direct Materials (DM)

Raw materials that become part of the finished product and can be directly traced to it.

Direct Materials Purchases Formula (Quantities)

$$\text{Materials needed for production} + \text{Desired ending raw materials inventory} - \text{Beginning raw materials inventory} = \text{Materials to purchase}$$

Direct Labor (DL)

Workers' time directly spent making the product, calculated by multiplying units to produce by direct labor hours per unit and the hourly labor rate.

Manufacturing Overhead (MOH)

Factory costs other than direct materials and direct labor, including indirect materials, indirect labor, factory utilities, maintenance, depreciation, supervision, and property taxes.

Unit Product Cost

The manufacturing cost required to make one unit, calculated as $\text{direct materials per unit} + \text{direct labor per unit} + \text{manufacturing overhead per unit}$.

Cash Budget

A financial budget tracking expected cash flows, composed of three main sections: cash receipts, cash disbursements, and financing.

Budgetary Control

The use of budgets to control operations through reports that compare actual results with planned objectives, provide feedback, and guide corrective action.

Static Budget

A projection of budget data at a single activity level that does not change even if actual output changes.

Flexible Budget

A projection of budget data across various activity levels, adjusted to the actual activity level to provide a fair performance evaluation.

Activity Index

The measure driving costs in a business, such as units produced, direct labor hours, or machine hours.

Relevant Range

The activity interval within which the stated cost assumptions (fixed and variable behavior) remain valid.

Standard Cost

A predetermined unit cost describing what one product should require, whereas a budget represents a total cost amount.

Normal Standards

Standards that assume efficient, attainable performance under expected operating conditions, allowing for reasonable rest periods, setup time, downtime, waste, or spoilage.

Ideal Standards

Standards that represent optimum levels of performance assuming perfect operating conditions with no waste, spoilage, or downtime.

Standard Quantity Allowed ($SQ$)

The total standard quantity of material allowed for actual output, calculated as $\text{standard material quantity per finished unit} \times \text{actual finished units produced}$.

Standard Hours Allowed ($SH$)

The total standard direct labor hours allowed for actual output, calculated as $\text{standard hours per product} \times \text{actual products made}$.

Materials Price Variance

A variance measuring differences between the price paid for materials and standard price, calculated as $AQ \times (AP - SP)$.

Materials Quantity Variance

A variance measuring differences in material efficiency or usage, calculated as $SP \times (AQ - SQ)$.

Labor Price (Rate) Variance

A variance measuring differences in wages paid versus the standard rate, calculated as $AH \times (AR - SR)$.

Labor Quantity (Efficiency) Variance

A variance measuring labor hour efficiency against standard hours allowed, calculated as $SR \times (AH - SH)$.

Total Manufacturing Overhead Variance

The difference between actual overhead incurred and applied overhead, calculated as $\text{Actual MOH} - \text{Applied MOH}$, where applied overhead equals $SH \times \text{predetermined overhead rate}$.

Balanced Scorecard

An integrated performance measurement system linking strategic goals with financial and nonfinancial measures across four perspectives: financial, customer, internal business processes, and learning and growth.