Cost Accounting 9 ed Kinney chapter 7

material mix variance

(actual mix actual quantity x standard price) minus (standard mix x actual quantity x standard price); is a measure of the monetary effect of substituting a nonstandard mix of material.

labor mix variance

(actual mix x actual hours x standard rate) minus (standard mix x actual hours x standard rate); presents the financial effect associated with changing the proportionate amount of higher- or lower-paid workers in production.

material quantity variance (MQV)

(actual quantity x standard price) minus (standard quantity allowed x standard price); reflects the cost saved (favorable) or expended (unfavorable) due to the difference between the actual quantity of materials used and the standard quantity of materials allowed for the good produced during the period.

Labor yield variance

(standard mix actual hours x standard rate) minus (standard mix x standard hours x standard rate); show the monetary impact using more or fewer total hours than the standard allowed.

material yield variance

(standard mix x actual quantity x standard price)minus (standard mix x standard quantity x standard price); computes the difference between actual total quantity of input and the standard total quantity allowed based on output and uses standard mix and standard prices to determine variance.

standard cost card

a document that summarizes he direct material, direct labor, and overhead standard quantities and prices needed to complete one unit of production.

volume variance

a fixed overhead variance that represents the difference between budgeted fixed overhead and fixed overhead applied to production of the period is also referred to as the non-controllable variance.

management by exception

a management concept involving the setting of upper and lower tolerance limits for deviations.

standard

a model or budget against which actual results are compared and evaluated; a benchmark or norm used for planning and control purposes.

operations flow document

a source document listing all operations necessary to produce one unit of product (or perform a specific service) and the corresponding time allowed fr each opperation.

bill of material

a source document that contains information about the product material components and their specifications (including quality and quantities needed).

expected standard

a standard set at a level that reflects what is actually expected to occur in the future period; anticipates future waste and inefficiencies and allows for them; is of limited value for control and performance evaluation purposes.

practical standard

a standard that can be reached or slightly exceeded with reasonable effort by workers; allows for normal, unavoidable delays and for worker breaks; is often believed to be most effective in including the best performance from worker because it represents an attainable challenge.

ideal standard

a standard that provides for no inefficiencies of any type ; is impossible t attain on a continuous basis.

methods-time measurement

an industrial engineering process that analyzes work task to determine the time a trained worker requires to perform a given operation at a rate that can be sustained for an eight-hour workday.

mix

any possible combination of materiel or labor inputs

labor rate variance (LRV)

the actual rate (or actual weighted average rate) paid to direct labor for the period minus the standard rate multiplied by all hours actually worked during the period; can also be calculated as actual labor cost minus (actual hours x standard rate).

controllable variance

the budget variance of the two-variance approach to analyzing overhead variances.

variable overhead efficiency variance

the difference between budgeted variable overhead based on actual input activity and variable overhead applied to production

fixed overhead spending variance

the difference between the total actual fixed overhead and budgeted fixed overhead is computed as part of the four-variance overhead analysis.

total overhead variance

the difference between total actual overhead and total applied overhead; is the amount of under-applied or over-applied overhead.

overhead spending variance

the difference between total actual overhead and total budgeted overhead at actual hours; is computed as part of a three-variance analysis; is equal tot the sum of the variable and fixed overhead spending variances.

variable overhead spending variance

the difference between total actual variable overhead and the budgeted amount of variable overhead based on actual input activity.

overhead efficiency variance

the difference between total budged overhead at actual hours and total budgeted overhead at standard hours allowed for the production achieved; is computed as part a three-variance analysis; is the same as variable overhead efficiency variance.

budget variance

the difference between total overhead based on standard hours allowed for the production achieved during the period; computed as part of two-variance overhead analysis; also referred to as the controllable variance.

noncollectable variance

the fixed overhead volume variance; is computed as part of the two-variance approach to overhead analysis

labor efficiency variance (LEV)

the number of hours actually worked minus the standard hour allowed for the production achieved multiplies by the standard rate; establishes a value of efficiency (favorable) or inefficiency (unfavorable) of the work force.

variance analysis

the process of categorizing the nature (favorable or unfavorable) or the differences between standard and actual cost and determining the reasons for the differences

yield

the quantity of output that results from a specified input.

standard quantity

the standard quantity of input (in hours or some other cost driver measurement) required fr the output actually achieved for the period.

material price variance (MPV)

total actual cost of material purchased minus (actual quantity of material x standard price; is the amount of money spent below (favorable) or in excess (unfavorable) of the standard price for the quantity of material purchased or the actual quantity used.

total cost of ownership (TCO)

which includes price, freight/duty/tax charges, payments and discount terms, inventory storage costs, scrap rates, rebates or special incentives, warranties, and disposal cost.