| A | B |
|---|
| Standards | performance goals. Used by service, merchandising, and manufactoring businesses to evaluate and control operations |
| Standard Cost Systems | the use of standard cost for the three manufactoring cost, DM, DL, FOH |
| Standard cost | how much a product should cost |
| Actual Cost | How much a product does cost |
| Cost variances | cause of difference between Standard cost and Actual cost |
| ideal/theoretical standards | standards that can be achieved under perfect operating conditions |
| currently attainable/normal standards | standards that can be attained with reasonable effort. They allow for normal production difficulties and employees become more focused on cost and give less effort |
| When standards should be revised | when prices, production design, labor rates, or manufactoring methods change |
| Budget performance report | summarizes the actual cost, the standard amounts for the actual level of production achieved, and the difference between the two amounts(cost variance) |
| favorable cost variance | occurs when the actual cost is less than the standard cost |
| Unfavorable cost variance | occurs when the actual cost exceeds the standard cost |
| Direct Materials Price Variance | the difference between the actual price per unit and the standard price per unit, multiplied by the actual quantities used. |
| Direct Materials Quantity Variance | the difference between the actual quantity used and the standard quantity at actual production, multiplied by the standard price per unit |
| Direct Labor Rate Variance | the difference between the actual rate per hour and the standard rate per hour, multiplied by the actual hours worked |
| Direct Labor Time Variance | the difference between the actual hours worked and the standard hours at actual production, multiplied by the standard rate per hour |
| Centralized business | one in which all major planning and operating decisions are made by top management. |
| Decentralization | Seperating a business into divisions or operating units and delegating responsibility to unit managers. |
| Responsibility centers | unit managers area of responsibility. The three common types are cost centers, profit centers, and investment centers |
| Responsibility accounting | the process of measuring and reporting operating data by responsibility center. |
| cost center | the unit manager has responsibility and authority for controlling the cost incurred. |
| Profit center | the unit manager has the responsibility and authority to make decisions that affect both costs and revenues (and thus profits). Profit centers may be divisions, departments, or products. |
| Controllable revenues | revenues earned by the profit center |
| Controllable Expenses | cost that can be influenced (controlled) by the decisions of profit managers |
| Service Department charges | the cost of services provided by an internal service department and transferred to a resonsibility center |
| activity base | for each service department it is used to charge service department expenses to the divisions. It is a measure of the services performed for each service department. |
| Service department charge rates | the rates at which services are charged to each division |
| Income from operations | in profit center accounting it is a measure of a manager's performance. |
| relevant revenues and cost | focus on the differences between each alternative. |
| Sunk costs | costs that have been incurred in the past that are not relevant to the decision |
| differential revenue | the amount of increase or decrease in revenue expected from a course of action as compared with an alternative. |
| differential cost | the amount of increase or decrease in cost that is expected from a course of action as compared with an alternative |
| differential income or loss | the difference between the differential revenue and the differential cost. Differential income indicates that a particular decision is expected to be profitable, while differntial loss indicates the opposite (differential revenue - differential cost) |
| Differential analysis | focuses on the effect of alternative courses of action on the relevant revenues and cost |
| oppurtunity cost | the amount of income that is forgone from an alternative use of an assest, such as cash |
