Module 3 Flashcards Preview

BA > Module 3 > Flashcards

Flashcards in Module 3 Deck (18)
Loading flashcards...
1
Q

What is a standard cost?

A

The expected cost of a unit of a product
Relate to budgeted cost per unit of output
All expected costs to manufacture a specific unit e.g. labour, materials overhead
Result of a standard quantity at a standard price

2
Q

What is a budgeted cost?

A

Total costs to manufacture all anticipated unites of a product

3
Q

What are variances?

A

Deviations between standard and actual performances

4
Q

What are the two typical elements of variance?

A

Efficiency/volume variance

Price/rate variance

5
Q

What is efficiency/volume variance?

A

Relates to using more or less of a resource than standard

6
Q

What is price/rate variance?

A

Resource costing more or less than the standard

7
Q

What are the 7 variances?

A
Sales volume contribution
Sales price
Material price
Materials usage
Labour rate
Labour efficiency
Fixed overhead
8
Q

What is sales volume contribution variance?

A

Sold more/less than expected

9
Q

What is sales price variance?

A

Sold units for higher/lower price

10
Q

What is material price variance?

A

Materials cost more/less per kg than expected

11
Q

What is materials usage variance?

A

More/less kg were used to make each unit than expected

12
Q

What is labour rate variance?

A

Labour cost more/less per hour than expected

13
Q

What is labour efficiency variance?

A

Labour took more/less hours to make each unit than expected

14
Q

What is fixed overhead variance?

A

Fixed overheads cost more/less than expected

15
Q

Steps for comparison between actual and budgeted?

A

Set standard costs (ongoing and reviewed)
Produce budget at planned level of activity
Produce flexed budget using standard costs and actual level of activity
Calculate actual results
Calculate variances between actual and budgeted

16
Q

Golden rules of variances?

A

For all other than sales volume contribution us ACTUAL units
For all PRICE/RATE use actual no. of kg/hours
For all EFFICIENCY/USAGE value the difference using the STANDARD cost per kg/hour

17
Q

Problems with using standard costing?

A

Variance reports often monthly so out of date when managers get them
Investigations tend to focus on negatives- quality could decrease if rush to increase output
Direct labour is often not a significant cost- variances not relevant to
Less material may represent poorer value to customer- favourable variances may result in unsatisfied customers

18
Q

What are the three categories of variances?

A

Planning
Cost
Operations