Chapter 10: Variance Analysis and Standard Costing & Chapter 12: Absorption versus Variable Costing

These flashcards cover key concepts related to budgeting, variance analysis, absorption costing, and variable costing.

What is the purpose of budgeting and variance analysis?

To plan operations and understand differences between budgeted and actual performance.

What does the sales activity variance indicate?

It shows the difference between budgeted sales and actual sales, highlighting the effect of sales volume changes.

What are the two components of the master budget variance?

The two components are the price variance and the efficiency variance.

How do you calculate direct materials variances?

• Direct Material Price Variance: Actual\;Quantity\;Purchased \times (Actual\;Price - Standard\;Price)
• Direct Material Quantity Variance: Standard\;Price \times (Actual\;Quantity\;Used - Standard\;Quantity\;Allowed)

How do you calculate direct labor variances?

• Direct Labor Rate Variance: Actual\;Hours\;Worked \times (Actual\;Rate - Standard\;Rate)
• Direct Labor Efficiency Variance: Standard\;Rate \times (Actual\;Hours\;Worked - Standard\;Hours\;Allowed)

What are variable-MOH variances?

These variances compare the actual variable manufacturing overhead costs to the standard costs.

How do you calculate fixed-MOH variances?

By determining the difference between actual fixed manufacturing overhead and the budgeted fixed overhead.

What costs are included as product costs under absorption costing?

Direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead.

How does making more units than you sell affect operating income under absorption costing?

Operating income increases due to fixed overhead being spread over more units.

How do you calculate per unit product cost under absorption costing?

Per\;Unit\;Product\;Cost = \frac{Direct\;Materials + Direct\;Labor + Variable\;MOH + Fixed\;MOH}{Units\;Produced}

How do you calculate operating income under variable costing?

Operating\;Income = (Sales\;Revenue - Total\;Variable\;Costs) - Total\;Fixed\;Costs
(where Total Variable Costs include manufacturing and non-manufacturing variable costs).

How do you calculate the fixed manufacturing overhead volume variance?

Fixed\;MOH\;Volume\;Variance = (Standard\;Fixed\;MOH\;Rate \times Standard\;Hours\;Allowed\;for\;Actual\;Output) - Budgeted\;Fixed\;MOH