Accounting Ch 5-9

Spending Variance *

the difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity

Contribution Margin Ratio *

percentage of sales

budget *

A detailed plan for the future that is usually expressed in formal quantitative terms.

cash budget *

A detailed plan showing how cash resources will be acquired and used over a specific time period.

Sales Budget *

A detailed schedule showing expected sales expressed in both dollars and units. The first step in the budgeting process

master budget *

A number of separate but interdependent budgets formally lay out the company's sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet.

flexible budget *

A report showing estimates of what revenues and costs should have been, given the actual level of activity for the period.

unfavorable *

If the actual costs are greater than the estimated or budgeted costs

Margin of safety *

The amount by which sales can drop before losses are incurred is the

Activity Variance *

The difference between a revenue or cost item in the flexible budget and the same item in the static planning budget. An activity variance is due solely to the difference between the actual level of activity used in the flexible budget and the level of activity assumed in the planning budget.

Revenue Variance *

The difference between the actual revenue for the period and how much the revenue should have been, given the actual level of activity. A favorable (unfavorable) revenue variance occurs because the revenue is higher (lower) than expected, given the actual level of activity for the period.

planning *

The process of establishing goals and specifying how to achieve them.

Sale Mix *

The relative proportions in which a company's products are sold.

Variable Expense Ratio *

The variable expense as a percentage of sales

Expected Cash Collections *

Which is completed in connection with the sales budget provides data for both the cash budget and the budgeted balance sheets

Operating Leverage *

a measure of how sensitive net operating income is to a given percentage change in dollar sales

cash disbursements *

a payment made by one party to another.

cost structure *

the relative proportion of fixed, variable, and mixed costs in an organization

Production Budget *

used to determine the direct materials, direct labor, and manufacturing overhead budgets. Is prepared after the sales budget

favorable *

when the cost to produce something is less than the budgeted cost.