ACCT 5361 MODULE 4

What is the variance analysis cycle

1. prepare performance report

2. analyze variances

3. raise questions

4. identify root causes

5. take questions

6. conduct next periods operations

What is management by exception

management system that compares actual results to a budget so that significant deviations can be flagged as exceptions and investigated further

What is the planning budget

prepared before the period begins and is valid for only the planned level of activity, which many times is different than the actual level of activity

What is the flexible budget

an estimate of what revenues and costs should have been, given the actual level of activity for the period

What is activity variance

variance between the planning budget and the flexible budget

What are revenue and spending variances

variance between the actual results and the flexible budget

What are quantity standards

specifies how much of an input should be used to make a product or provide a service

What are price standards

specify how much should be paid for each unit of the input

What is standard quantity per unit

defines the amount of direct materials that should be used for each unit of finished product

What is standards price per unit

defines the price that should be paid for each unit of direct materials

What are standard hours per unit

defines the amount of direct labor-hours that should be used to produce one unit of finished goods

What is standard rate per hour

defines the company’s expected direct labor wage rate per hour

What is the direct materials price variance

measures the difference between the actual price paid per unit and its standard price

What is the direct material quantity variance

measures the difference between the actual quantity of materials used in production and the standard quantity allowed