Managerial Accounting: Vocab Ch. 10

Quantity Varance

is the difference between how much of an input was actually used and how much should have been used and is stated in dollar terms using the standard price of the input

Materials Quantity Variance

measures the difference between the quantity of materials used in production and the quantity that should have been used according to the standard.

Materials Price Variance

measures the difference between what is paid for a given quantity of materials and what should have been paid according to the standard.

Standard Rate Per Hour

reflects the expected "mix" of workers, even though the actual wages rate may vary somewhat from individual to individual due to differing skills or seniority.

Standard Cost Card

shows the standard quantities and costs of the inputs required to produce a unit of a specific product.

Labor Efficiency Variance

1. attempts to measure the productivity of direct labor. 2. closely watched by managers due to their belief that increasing direct labor productivity is vital to reducing costs

Standard Quantity Allowed

1. the amount of an input that should have been used to produce the actual output of the period 2. is computed by multiplying the actual output in units by the standard input allowed per unit of output

denominator Activity

1. the estimated total amount of the allocation base in the formula for the predetermined overhead rate 2. the level of activity used to compute the predetermined overhead rate

Labor Rate Variance

1. the price variance of direct labor 2. measures any deviation form standard in the average hourly rate paid to direct labor workers.

Standard Hour Allowed

1. the time that should have been taken to complete the period/s output 2. is computed by multiplying the actual numbers of units produced by the standard hours per unit

Practical Standards

are standards that are "tight but attainable."

Ideal Standards

can be attained only under the best circumstances.

Standard Cost Per Unit

computed the same way as direct labor and direct material: the standard quantity allowed per unit of the output is multiplied by the standard price

Standard Quantity Per Unit

for direct materials should reflect the amount of material required for each unit of finished product as well as an allowance for unavoidable waste

Budget Variance

the difference between the actual fixed manufacturing overhead and the budgeted fixed manufacturing overhead for the period

Variable Overhead Efficiency Variance

the difference between the actual level of activity (direct labor-hours, machine-hours, or some other base) and the standard activity allowed, multiplied by the variance part of the predetermined overhead rate.

Price Variance

the difference between the actual price of an input and its standard price, multiplied by the actual amount of input purchased

Variable Overhead Rate Variance

the difference between the actual variable overhead cost incurred during a period and the standard cost that should have been incurred based on the actual activity of the period

Volume Variance

the difference between the budgeted fixed overhead and the fixed overhead applied to work in process

Standard Price Per Unit

the price that should be paid for an input.

Standard Hours Per Unit

the standard direct labor time required to complete a unit of product

Management by Exception

when the quantity or the cost of inputs departs significantly from the standards, managers investigate the discrepancy to find the cause of the problem and eliminate it