Managerial Accounting Ch. 9 & 10

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.

Planning Budget

A budget created at the beginning of the budgeting period that is valid only for the planned level of activity

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.

Standard Cost Card

A detailed listing of the standard amounts of inputs and their costs that are required to produce one unit of a specific product.

management by exception

A management system in which actual results are compared to a budget. Significant deviations from the budget are flagged as exceptions and investigated further.

flexible budget

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

Standard Hours Allowed

The time that should have been taken to complete the period's output. It is computed by multiplying the actual number of units produced by the standard hours per unit.

Materials Quantity Variance

SP(AQ used - SQ)

standard price per unit

The price that should be paid for each unit of direct materials. It should reflect the final, delivered cost of those materials.

Labor Efficiency Variance

SR(AH-SH)

Variable Overhead Efficiency Variance

SR(AH-SH)

Labor Rate Variance

AH(AR-SR)

Variable Overhead Rate Variance

AH(AR-SR)

Materials Price Variance

AQ purchased(AP-SP)

Price Variance

AQ(AP-SP)

standard hours per unit

The amount of direct labor time that should be required to complete a single unit of product, including allowances for breaks, machine downtime, cleanup, rejects, and other normal inefficiencies.

Standard Quantity per Unit

The amount of direct materials that should be used for each unit of finished product, including an allowance for normal inefficiencies, such as scrap and spoilage.

standard quantity allowed

The amount of direct materials that should have been used to complete the period's actual output. It is computed by multiplying the actual number of units produced by the standard quantity per unit.

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.

standard rate per hour

The labor rate that should be incurred per hour of labor time, including employment taxes and fringe benefits

Standard Cost per Unit

The standard quantity allowed of an input per unit of a specific product, multiplied by the standard price of the input.