Fixed budget is based on a single predicted amount of sales or production volume; unsuitable for evaluations if the actual volume differs from the predicted volume. Standard costs are preset costs for delivering a product, component, or service under normal conditions. Price variance is the difference between actual and budgeted sales or cost caused by the difference between actual price per unit and the budgeted price per unit. Quantity variance is difference between actual and budgeted costs caused by the difference between the actual quantity and the budgeted quantity. Volume variance is the combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance. Controllable variance is difference between the total budgeted overhead cost and the overhead cost that was allocated to products using the predetermined fixed overhead rate. Cost variance is difference between actual cost and standard cost, made up of a price variance and a quantity variance. Flexible budget is prepared on predicted amounts of revenues and expenses corresponding to the actual level of output. Variance analysis is the process of examining the differences between actual and budgeted sales or costs and describing them in terms of the amount that resulted from price and quantity differences. Management by exception is the management process to focus on significant variances and give less attention to areas where performance is closed to the standard. Requirement: Identifying terms with their corresponding definition.

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Chapter 8, Problem 7E

To determine

Concept introduction:

Fixed budget is based on a single predicted amount of sales or production volume; unsuitable for evaluations if the actual volume differs from the predicted volume.

Standard costs are preset costs for delivering a product, component, or service under normal conditions.

Price variance is the difference between actual and budgeted sales or cost caused by the difference between actual price per unit and the budgeted price per unit.

Quantity variance is difference between actual and budgeted costs caused by the difference between the actual quantity and the budgeted quantity.

Volume variance is the combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance.

Controllable variance is difference between the total budgeted overhead cost and the overhead cost that was allocated to products using the predetermined fixed overhead rate.

Cost variance is difference between actual cost and standard cost, made up of a price variance and a quantity variance.

Flexible budget is prepared on predicted amounts of revenues and expenses corresponding to the actual level of output.

Variance analysis is the process of examining the differences between actual and budgeted sales or costs and describing them in terms of the amount that resulted from price and quantity differences.

Management by exception is the management process to focus on significant variances and give less attention to areas where performance is closed to the standard.

Requirement:

Identifying terms with their corresponding definition.

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