Fundamentals Of Cost Accounting (6th Edition)
6th Edition
ISBN: 9781259969478
Author: WILLIAM LANEN, Shannon Anderson, Michael Maher
Publisher: McGraw Hill Education
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Textbook Question
Chapter 16, Problem 13CADQ
Pick an organization you know, such as a school, local firm, a business, an entertainment business, a sports team, and so on. Identify an example of when a favorable cost variance (actual cost relative to a budget) is not good news for the performance of the organization.
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Students have asked these similar questions
A company using direct costing in its performance evaluation would normally include the following variance in its report , except
a. Efficiency variance
b. Volume variance
c. Budget variance
d. Price variance
Which of the following statements is false?
Standard costs (e.g., how much should be paid for each unit of input) are benchmarks for measuring performance.
Managers should investigate only unfavorable variances.
Variance analysis enhances responsibility accounting.
A variance is the difference between the budgeted amount and actual amount.
Match the definition the term.
Terms:
Cost variance
Overhead cost variance
Price variance
Quantity variance
Standard costs
Sales budget
Production Budget
Balanced scorecard
Profit center
Cost center
Definitions:
1. A plan showing the units of goods to be sold and sales to be derived; usually starting pointing the budgeting process.
2. A system of performance measures, including the nonfinancial measures, used to asses manager performance.
3. A department that incurs cost and genrate revenues, such as a selling department
4. The difference between actual and budgeted sales or cost caused by the difference between the actual per unit and the budgeted price per unit.
5. The difference between actual cost and standard cost, made up of a price variance and a quantity variance.
6. The difference between the total overhead cost actually incurred and the total overhead cost applied to products
7. The difference between the actual budgeted cost caused by…
Chapter 16 Solutions
Fundamentals Of Cost Accounting (6th Edition)
Ch. 16 - What are the advantages of the contribution margin...Ch. 16 - How can a budget be used for performance...Ch. 16 - The flexible budget for coats it computed by...Ch. 16 - A flexible budget is: a. Appropriate for control...Ch. 16 - What is the standard cost sheet?Ch. 16 - What is the basic difference between a mailer...Ch. 16 - Standards and budgets are the same thing. True or...Ch. 16 - Actual direct materials costs differ from the...Ch. 16 - Fixed cost variances are computed differently from...Ch. 16 - What is the advantage of preparing the flexible...
Ch. 16 - What is the link between flexible budgeting and...Ch. 16 - Actual revenues are greater than budgeted for...Ch. 16 - Pick an organization you know, such as a school,...Ch. 16 - Give two reasons why dividing production cost...Ch. 16 - Prob. 15CADQCh. 16 - My firm has a wage contract with the union....Ch. 16 - Prob. 17CADQCh. 16 - The production volume variance should be charged...Ch. 16 - Prob. 19CADQCh. 16 - Prob. 20CADQCh. 16 - Flexible Budgeting The master budget at Western...Ch. 16 - Sales Activity Variance Refer to the data in...Ch. 16 - Profit Variance Analysis Refer to the data in...Ch. 16 - Flexible Budget Given the data shown in the...Ch. 16 - Fill in Amounts on Flexible Budget Graph Fill in...Ch. 16 - Flexible Budget Label (a) and (b) in the graph and...Ch. 16 - Prepare Flexible Budget Osage, Inc., manufactures...Ch. 16 - Sales Activity Variance Refer to the data in...Ch. 16 - Profit Variance Analysis Use the information from...Ch. 16 - Sales Activity Variance The following data are...Ch. 16 - Sales Activity Variance Selected data for October...Ch. 16 - Prob. 32ECh. 16 - Prob. 33ECh. 16 - Prob. 34ECh. 16 - Prob. 35ECh. 16 - Prob. 36ECh. 16 - Prob. 37ECh. 16 - Variable Cost Variances The following data reflect...Ch. 16 - Variable Cost Variances The records of Norton,...Ch. 16 - (Appendix used in requirement [b]) Variable Cost...Ch. 16 - (Appendix used in requirement [b]) Variable Cost...Ch. 16 - Fixed Cost Variances Information on Carney...Ch. 16 - Prob. 43ECh. 16 - Prob. 44ECh. 16 - Fixed Cost Variances Mint Company applies fixed...Ch. 16 - Prob. 46ECh. 16 - Prob. 47ECh. 16 - (Appendix used in requirement [c]) Comprehensive...Ch. 16 - Comprehensive Cost Variance Analysis NSF Lube is a...Ch. 16 - Overhead Variances Brice Corporation shows the...Ch. 16 - Solve for Master Budget Given Actual Results A new...Ch. 16 - Find Missing Data for Profit Variance Analysis...Ch. 16 - Find Data for Profit Variance Analysis Required...Ch. 16 - Prob. 54PCh. 16 - Prepare Flexible Budget Odessa, Inc., reports the...Ch. 16 - Prob. 56PCh. 16 - Prob. 57PCh. 16 - Prob. 58PCh. 16 - Prob. 59PCh. 16 - Prob. 60PCh. 16 - Direct Materials Information about direct...Ch. 16 - Prob. 62PCh. 16 - Prob. 63PCh. 16 - Prob. 64PCh. 16 - Overhead Cost and Variance Relationships...Ch. 16 - Prob. 66PCh. 16 - Prob. 67PCh. 16 - Ethics and Standard Costs Farmer Franks produces...Ch. 16 - Comprehensive Variance Problem The standard cost...Ch. 16 - Prob. 70PCh. 16 - Find Actual and Budget Amounts from Variances JW...Ch. 16 - Variance Computations with Missing Data The...Ch. 16 - Comprehensive Variance Problem Sweetwater Company...Ch. 16 - Prob. 74PCh. 16 - Prob. 75PCh. 16 - Keewee Company manufactures a single product for...
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- Continuous improvement is the governing principle of a lean accounting system. Following are several performance measures. Some of these measures would be associated with a traditional standard-costing accounting system, and some would be associated with a lean accounting system. a. Materials price variances b. Cycle time c. Comparison of actual product costs with target costs d. Materials quantity or efficiency variances e. Comparison of actual product costs over time (trend reports) f. Comparison of actual overhead costs, item by item, with the corresponding budgeted costs g. Comparison of product costs with competitors product costs h. Percentage of on-time deliveries i. First-time through j. Reports of value- and non-value-added costs k. Labor efficiency variances l. Days of inventory m. Downtime n. Manufacturing cycle efficiency (MCE) o. Unused (available) capacity variance p. Labor rate variance q. Using a sister plants best practices as a performance standard Required: 1. Classify each measure as lean or traditional (standard costing). If traditional, discuss the measures limitations for a lean environment. If it is a lean measure, describe how the measure supports the objectives of lean manufacturing. 2. Classify the measures into operational (nonfinancial) and financial categories. Explain why operational measures are better for control at the shop level (production floor) than financial measures. Should any financial measures be used at the operational level? 3. Suggest some additional measures that you would like to see added to the list that would be supportive of lean objectives.arrow_forwardWhich 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.arrow_forwardWhich of the following is a possible cause of an unfavorable labor efficiency variance? A. hiring substandard workers B. making too many Units C. buying higher-quality material D. paying too much for workersarrow_forward
- When would a static budget be effective in evaluating a managers performance?arrow_forwardA variety of quantitative measures are used to evaluate employee performance, including standard costs, financial ratios, human resource forecasts, and operating budgets.a. Discuss the following aspects of a standard cost system.1. Discuss the characteristics that should be present to encourage positive employee motivation.2. Discuss how the system should be implemented to positively motivate employees.b. The use of variance analysis often results in management by exception.1. Explain the meaning of management by exception.2. Discuss the behavioral implications of management by exception.c. Explain how employee behavior could be adversely affected when actual-to-budget comparisons are used as the basis for performance evaluation.arrow_forwardWhat are standard costs and why do companies use standard costs? Discuss the difference between ideal and practical standards. Which is most useful to a company and why? In your opinion, what are the two most significant advantages and disadvantages of using standard costs? Support your opinion. What is a static planning budget? Is it useful? Why or why not? What is a flexible budget? How does it differ from a static planning budget? Explain why the flexible budget more useful than the static planning budget.arrow_forward
- Of the several uses of standard costing, one of the most controversial is using these standards for performance evaluation of an individual, team, or unit. Consider the labor efficiency variance and assume it is one of the measures for a company’s performance evaluation of a business unit. When might or might not variance from such a standard be an appropriate measure? How would this metric’s effectiveness as a performance measure be affected by a decrease in demand or changes in production volume? Would its effectiveness be different for a service unit than a manufacturing unit? In the event that it is not effective as a performance measure, does it have a strong purpose?arrow_forwardIndicate whether the item below is used as key performance indicators for the areas of (A) Financial, (B) Customer, (C) Internal Process, or (D) Learning and Growth performance. Choose the one best choice. Quantity variance on a cost report *(A) Financial(B) Customer(C) Internal Process(D) Learning and Growth performance.arrow_forwardStandard Costing and Variance Analysis Standard cost systems set budgets for the materials, labor, and factory overhead used by a manufacturer to produce its product. Deviations from these standards are reported as variances.. Standards-variance analysis cost control system can be applied to non-manufacturing businesses, provided that they use repetitive activities to produce a common product or service. Based on real-life experience, describe and discuss a non-manufacturing (service) business that could benefit from the use of standards. Also explain how standards would help that business control its operations.arrow_forward
- What is a standard cost? Group of answer choices The total number of units times the budgeted amount expected Any amount that appears on a budget The total amount that appears on the budget for product costs The amount management thinks should be incurred to produce a good or servicearrow_forwardThe performance evaluation of a cost center is typically based on its a. sales volume variance. b. ROI. c. static budget variance. d. flexible budget variance.arrow_forwarda) Briefly discuss the similarities and differences between the terms 'overhead absorption rate' and 'cost driver rate'. b) Briefly discuss the meaning of the term 'sensitivity analysis' and how it could be used in variable costing. c) Briefly discuss the characteristics of good information that budgets might be expected to possess. d) Briefly discuss the reasons why payback period is often preferred as an investment appraisal technique, and also its limitations.arrow_forward
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY