Is a standard cost an estimated cost? What is theprimary objective of employing standard costs in acost system?> What is a budget?> What is the difference between ideal andpractical standards? Which standard generally isused in planning?> What is meant by the term management byexception?> What are some advantages of using standardcosts? What are some disadvantages?

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Business

Accounting

Is a standard cost an estimated cost? What is the primary objective of employing standard costs in a cost system?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 1CMA: When compared to static budgets, flexible budgets: a. offer managers a more realistic comparison of...

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Concept explainers

Management by Exception

A manager’s job is a very tough one. A manager needs to look at the various areas of work and as a manager he has to look after two or more important jobs or activities at the same time for the growth of the business. In order to do all these things in an effective manner, a manager must adopt or practice different management styles and tactics.

Question

Is a standard cost an estimated cost? What is the
primary objective of employing standard costs in a
cost system?
> What is a budget?
> What is the difference between ideal and
practical standards? Which standard generally is
used in planning?
> What is meant by the term management by
exception?
> What are some advantages of using standard
costs? What are some disadvantages?

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When would a static budget be effective in evaluating a managers performance?
Explain why it is better to allocate budgeted support service costs rather than actual support service costs.
Which of the following is not a part of budgeting? A. planning B. finding bottlenecks C. providing performance evaluations D. preventing net operating losses
Why is it important to distinguish between variable costs and fixed costs for budgeting purposes?
Explain why mixed costs must be broken down into their fixed and variable components before a flexible budget can be developed.
How are standards used in budgetary performance evaluation?
Which of the following is true in a bottom-up budgeting approach? Every expense needs to be justified. Supervisors tell departments their budget amount and the departments are free to work within those amounts. Departments budget their needs however they see fit. Departments determine their needs and relate them to the overall goals.
What are the advantages and disadvantages of the bottom-up budgeting approach?
Why is the concept of relevant range important when preparing a flexible budget?
The actions listed next are associated with either an activity-based operational control system or a traditional operational control system: a. Budgeted costs for the maintenance department are compared with the actual costs of the maintenance department. b. The maintenance department manager receives a bonus for beating budget. c. The costs of resources are traced to activities and then to products. d. The purchasing department is set up as a responsibility center. e. Activities are identified and listed. f. Activities are categorized as adding or not adding value to the organization. g. A standard for a products material usage cost is set and compared against the products actual materials usage cost. h. The cost of performing an activity is tracked over time. i. The distance between moves is identified as the cause of materials handling cost. j. A purchasing agent is rewarded for buying parts below the standard price set by the company. k. The cost of the materials handling activity is reduced dramatically by redesigning the plant layout. l. An investigation is undertaken to find out why the actual labor cost for the production of 1,000 units is greater than the labor standard allowed. m. The percentage of defective units is calculated and tracked over time. n. Engineering has been given the charge to find a way to reduce setup time by 75 percent. o. The manager of the receiving department lays off two receiving clerks so that the fourth-quarter budget can be met. Required: Classify the preceding actions as belonging to either an activity-based operational control system or a traditional control system. Explain why you classified each action as you did.
Which budget evaluates the results of operations at the actual level of activity? capĂtal budget cash budget flexible budget static budget