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Managerial Acctng
Exam 2: 19, 20, 21
| Term | Definition |
|---|---|
| variable costing | costing method that includes only variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) in unit product costs; also called direct or marginal costing. |
| absorption costing | costing method that assigns both variable and fixed manufacturing costs to products; this method is required under U.S. GAAP; also called full costing. |
| contribution margin income statement | income statement that separates variable and fixed costs; highlights the contribution margin, which is sales less variable expenses |
| contribution margin | selling price minus variable cost; measures how revenues cover variable costs; the remainder (or contribution) is for fixed costs and any resulting income |
| variable cost of goods sold | direct materials, direct labor, and variable overhead costs for units sold |
| markup | amount added to cost per unit in computing a selling price |
| environmental profit and loss (EP&L) report | a report in monetary terms of the impact on human welfare from an entity’s activities |
| contribution margin ratio | product’s contribution margin divided by its sale price. |
| formula to convert variable costing income to absorption costing | income under variable costing + fixed overhead in ending FG inventory - fixed overhead in beginning FG inventory |
| budgeting | process of planning future business actions and expressing them as formal plans |
| budget | formal statement of future plans, usually expressed in monetary terms |
| budgetary control | management use of budgets to monitor and control company operations |
| continuous budgeting | practice of preparing budgets for a selected number of future periods and revising those budgets as each period is completed |
| rolling budgets | new set of budgets a firm adds for the next period (with revisions) to replace the ones that have lapsed |
| zero-based budgeting | a budgeting approach where each budget item must be justified against a zero base, without reference to amounts from prior periods |
| master budget | comprehensive business plan that includes specific plans for expected sales, product units to be produced, merchandise (or materials) to be purchased, |
| master budget | expenses to be incurred, plant assets to be purchased, and amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet |
| sales budget | plan showing the units of goods to be sold or services to be provided; the starting point in the budgeting process for most departments |
| production budget | plan that shows the units to be produced each period |
| safety stock | quantity of inventory or materials over the minimum needed to satisfy budgeted demand |
| direct materials budget | report showing budgeted costs for direct materials necessary to satisfy estimated production for the period |
| direct labor budget | report showing budgeted costs for direct labor necessary to satisfy estimated production for the period |
| factory overhead budget | report showing budgeted costs for factory overhead necessary to satisfy the estimated production for the period |
| cost of goods sold budget | a budget of total manufacturing costs for goods expected to be sold in the period |
| selling expense budget | plan that lists the types and amounts of selling expenses expected in the budget period |
| general and administrative expense budget | plan that shows predicted operating expenses not included in the selling expenses or manufacturing budgets |
| capital expenditures budget | plan that lists dollar amounts to be both received from disposal of plant assets and spent to purchase plant assets |
| cash budget | plan that shows expected cash inflows and outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans |
| budgeted income statement | accounting report that presents predicted amounts of the company’s revenues and expenses for the budget period |
| budgeted balance sheet | accounting report that presents predicted amounts of the company’s assets, liabilities, and equity balances as of the end of the budget period |
| revenue per employee | a measure of workforce effectiveness in generating revenue, computed as total revenue divided by total employees |
| budget reports | report comparing actual results to planned objectives; sometimes used as a progress report |
| fixed budget | planning budget based on a single predicted amount of volume; unsuitable for evaluations if the actual volume differs from predicted volume; also called a static budget |
| flexible budget | planning budget based on several predicted amounts of sales or other activity measure; also called a variable budget |
| variance | a difference between an actual amount and a budgeted amount |
| fixed budget performance report | report that compares actual revenues and costs with fixed budgeted amounts and identifies the differences as favorable or unfavorable variances |
| favorable variance | difference in actual revenues or expenses from the budgeted amount that contributes to a higher income |
| unfavorable variance | difference in revenues or costs, when the actual amount is compared to the budgeted amount, that contributes to a lower income |
| flexible budget equation | total budgeted costs = total fixed costs + (total variable cost per unit * units of activity) |
| flexible budget performance report | report that compares actual revenues and costs with their variable budgeted amounts based on actual sales volume (or other level of activity) and identifies the differences as variances |
| standard costs | costs that should be incurred under normal conditions to produce a product or component or to perform a service |
| management by exception | management process that focuses on significant variances and gives less attention to areas where performance is close to the standard. |
| cost variance | difference between the actual incurred cost and the standard cost |
| variance analysis | process of examining differences between actual and budgeted revenues or costs and describing them in terms of price and quantity differences |
| benchmarking | practice of comparing and analyzing company financial performance or position with other companies or standards |
| price variance | difference between actual and budgeted revenue or cost caused by the difference between the actual price per unit and the budgeted price per unit |
| quantity variance | difference between actual and budgeted revenue or cost caused by the difference between the actual number of units and the budgeted number of units |
| price variance (PV) | [Actual price (AP) - Standard Price (SP)] * Actual Quantity (AQ) |
| quantity variance (QV) | [Actual Quantity (AQ) - Standard Quantity (SQ)] x Standard Price (SP) |
| standard overhead rate | budgeted overhead at predicted activity level/standard allocation base at predicted activity level |
| Standard overhead applied | Actual production * standard amount of allocation base * standard overhead rate |
| overhead variance | difference between the total overhead cost applied to products and the total overhead cost actually incurred |
| overhead variance formula | actual total overhead - standard overhead applied |
| controllable variance | actual total overhead incurred minus budgeted total overhead. Equals the sum of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance |
| controllable variance formula | actual total overhead - budgeted (flexible) total overhead at actual units produced |
| volume variance | difference between two dollar amounts of fixed overhead cost; one amount is the total budgeted overhead cost, and the other is the overhead cost allocated to products using the predetermined fixed overhead rate |
| volume variance | budgeted overhead - standard overhead applied |
| International Integrated Reporting Council (IIRC) | a global coalition that is establishing integrated reporting guidelines |
| integrated reporting | a short report that shows how an organization’s strategy, governance, and performance relate to value creation |
| sales growth rate | analysis period sales - base period sales/base period sales |
| spending variance | difference between the actual price of an item and its standard price |
| efficiency variance | difference between the actual quantity of an input and the standard quantity of that input |
| variable overhead rate | variable overhead budgeted at predicted activity/standard allocation base at predicted activity level |
| fixed overhead rate | fixed overhead budgeted at predicted activity level/standard allocation base at predicted activity level |
| standard costing income statement | income statement that reports sales and cost of goods sold at their standard amounts and then lists the individual sales and cost variances to compute gross profit at actual cost |
Created by:
ryanriggs18
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