In standard costing and budgetary control, adverse variance indicates discrepancies where actual performance falls short of budgeted expectations, impacting the budgeted profit negatively.
Variance analysis in standard costing and budgetary control examining sub-variances to understand the causes of differences between budgeted and actual figures in financial performance.
Attainable standard refers to a cost or income standard set at a level that is achievable by operators under realistic conditions during the relevant cost period.
A cost or income standard set in standard costing to form the basis on which other standards are set. It is a foundational metric from which other variances and standards can be derived.
In standard costing or budgetary control, a controllable variance is a variance regarded as controllable by the manager responsible for that area of an organization. The variance occurs as a result of the difference between the budget cost allowance and the actual cost incurred for the period.
Cost control refers to the techniques used by various levels of management within an organization to ensure that costs incurred fall within acceptable levels. It involves the provision of financial information to management by the accountant and the use of various techniques such as budgetary control and standard costing to highlight and analyze any variances.
A cost, income, or performance standard based on current operating conditions and established for use over a short period of time in accounting and finance.
Direct Labour Efficiency Variance is an essential component in a standard costing system that evaluates the efficiency of labour in completing a given task. It compares the actual labour hours used to the standard hours expected and calculates the variance in cost using the standard direct labour rate.
In a standard costing system, a variance arising as part of the direct labour total cost variance. It compares the actual rate paid to direct labour for an activity with the standard rate of pay allowed for that activity for the actual hours worked. The resultant adverse or favourable variance is the amount by which the budgeted profit is affected by differences in direct labour rates of pay.
In standard costing systems, the direct materials mix variance is part of the direct materials usage variance. It represents the difference between the total material used in standard proportions (standard mix) and the material used in actual proportions, valued at standard prices (standard purchase price and standard selling price).
An accounting term used in standard costing to measure the difference between the actual cost of direct materials and the standard cost, identifying favorable or adverse variances that affect budgeted profit.
Direct Materials Usage Variance is a key metric in standard costing systems, evaluating the difference between the actual and standard quantities of materials used in production.
Direct Materials Yield Variance, also known as Direct Materials Quantity Variance, is a fundamental concept in standard costing systems. It assesses the efficiency in the use of direct materials by comparing the standard quantity allowed for production to the actual quantity used, then valuing this difference at standard prices.
Engineered costs involve calculating expected expenditures for a production process by constructing synthetic costs based on detailed analysis and logical considerations. This method is often used in standard costing, budgeting, and planning where estimated unit costs are necessary before production.
In standard costing and budgetary control, a favourable variance is any difference between the actual and budgeted performance of an organization where this creates an addition to the budgeted profit. For example, a favourable variance may occur if the actual sales revenue is greater than that budgeted or if actual costs are less than budgeted costs.
Financial control encompasses actions taken by the management of an organization to ensure that costs incurred and revenues generated are at acceptable levels. It involves the provision of financial information to management by accountants and utilizes techniques such as budgetary control and standard costing to highlight and analyze variances.
In a system of standard costing, the fixed overhead capacity variance measures the difference between the actual hours worked and the budgeted capacity available, valued at the standard fixed overhead absorption rate per hour.
In a system of standard costing, the fixed overhead efficiency variance represents the difference between the actual labor hours worked and the standard time allowed for the quantity actually produced, valued at the standard fixed overhead absorption rate per hour.
Fixed Overhead Expenditure Variance in standard costing refers to the difference between the fixed overhead budgeted and the actual fixed overhead incurred.
In a system of standard costing, the fixed overhead total variance represents the difference between the standard fixed overhead absorbed for the actual units produced and the actual fixed overhead expenditure incurred.
Fixed Overhead Volume Variance is a metric used in standard costing systems to quantify the difference between actual and budgeted production levels, valued at the standard fixed overhead absorption rate per unit. It measures the over- or under-recovery of fixed overheads due to the variance in actual activity levels from what was budgeted.
An ideal standard in standard costing represents a cost, income, or performance benchmark set to be achieved only under the most favorable conditions. It contrasts with expected standards, which are more attainable.
An income standard in standard costing refers to the predetermined level of income expected to be generated by an item to be sold. It is often applied to a budgeted quantity to determine the budgeted revenue.
In accounting, a normal standard represents an average standard that is used in standard costing. It is set to be applied over a future period during which conditions are expected to remain relatively stable.
A detailed analysis of operational variance within the framework of standard costing, highlighting how it accounts for the difference between adjusted current standards and actual performance.
Overhead Efficiency Variance is an accounting concept used in standard costing systems to measure the variance in overhead costs due to the efficiency or inefficiency of actual production time compared to the standard time allocated.
Overhead Expenditure Variance in Accounting represents the difference between the budgeted overhead allowance and the actual overhead incurred. This variance helps adjust the budgeted profits for over- or under-spending.
In a system of standard costing, the overhead total variance is the difference between the standard overhead recovered for actual units produced and the actual overhead incurred for a period.
In standard costing, a performance standard refers to the predetermined level of performance to be achieved during a specific period, which is used to calculate standard costs for processes, typically direct labor and materials.
Production Cost Variance in standard costing measures the difference between standard costs and actual costs for production. Understanding this variance helps in identifying efficiency levels and cost management effectiveness.
In standard costing, the variance consisting of the difference between the standard operating profit budgeted to be made on the items sold and the actual profits made. The analysis of the profit variance into its constituent sales, direct labor, direct material, and overhead variances provides the management of the organization with information regarding the source of the gains and losses compared to the predetermined standard.
A system in management accounting designed to provide information to all levels of an organization, based on the responsibility of individual managers for specific items of expenditure or income.
In standard costing, a revision variance, also known as a planning variance, measures the expected difference arising from the original standard and the modified standard due to changed circumstances. These variances help in understanding how accurately performance predictions align with actual outcomes.
The Sales Margin Mix Variance (Sales Mix Profit Variance) in standard costing measures the financial impact of changes in the actual mix of sales compared to the standard or budgeted sales mix. It isolates the portion of the sales volume variance attributable to variations in the product mix.
In standard costing, the sales margin price variance arises due to the difference between actual sales revenue and the budgeted or standard selling prices for the actual sales quantities achieved. This variance can be either adverse or favorable.
Sales Margin Quantity Variance is an important concept within standard costing that measures the difference between the budgeted sales quantity and the actual sales quantity, valued at the standard profit margin per product.
Sales Margin Volume Variance, often referred to as Sales Volume Variance, in standard costing, measures the adverse or favorable variance arising from the difference between the actual number of units sold and those budgeted, valued at the standard profit margin.
Sales volume variance is the difference between the budgeted sales quantity and the actual sales quantity, valued at the standard profit per unit or standard contribution margin per unit. It measures the impact of sales volume fluctuation on the financial performance of a business.
Under a standard costing system, the standard cost allowance refers to the level of expenditure permitted for variable costs, based on actual levels of activity. It helps in budgeting and controlling costs efficiently.
An essential component in a standard costing system, the standard cost card provides a detailed record of how the standard cost of a product is built up, encompassing materials, labor, and overheads.
Standard costing involves assigning a predetermined cost to products or services, which serves as a benchmark for measuring performance and cost control.
Standard costing is a cost accounting system that uses predetermined costs and income benchmarks for products and operations, comparing them with actual results to establish variances.
In standard costing, the standard direct labour cost is derived from the standard time allowed for the performance of an operation and the standard direct labor rate for the operators specified for that operation.
A predetermined rate of pay for direct labour operators used for establishing standard direct labour costs in a standard costing system, providing a basis for comparison with actual direct labour rates paid.
In standard costing, the standard cost derived from the standard quantity of materials allowed for the production of a product and the standard direct materials price for the materials specified for that product.
In standard costing, a predetermined price for direct materials used for establishing standard direct materials costs in order to provide a basis for comparison with the actual direct material prices paid.
In standard costing, a standard fixed overhead cost is derived from the standard time allowed for the performance of an operation or the production of a product and the standard fixed overhead absorption rate per unit of time for that operation or product.
A predetermined quantity of materials to be used in the production of a product, which is compared with the actual quantity of material used to provide a basis for material control.
A standard cost for the fixed and/or variable overhead of an operation derived from the standard time allowed for the performance of the operation or the production of a product and the standard overhead absorption rate per unit of time for that operation or product.
Understand the concept of Standard Purchase Price, a predetermined price set for each commodity of direct material for a specified period, used in a system of standard costing.
A predetermined rate of pay set for each classification of labor for a specific period. These rates are compared with the actual rates paid during the period to establish direct labor rate of pay variances in a system of standard costing.
A predetermined selling price set for each product sold for a specified period. These prices are compared with the actual prices obtained during the period in order to establish sales margin price variances in a system of standard costing.
In the context of standard costing systems, standard time refers to the time allowed to carry out a production task. It can be expressed either as the standard time allowed or in terms of standard hours representing the output achieved.
A comprehensive look at the Total Standard Production Cost, including standard direct materials cost, standard direct labor cost, standard fixed overhead cost, and standard variable overhead cost.
Understand the key concept of variable overhead efficiency variance within a standard costing system, and how it affects business financial performance.
Variable overhead expenditure variance in standard costing is the difference between the budgeted variable overhead expenses and the actual variable overhead expenses incurred.
In a system of standard costing, the total difference arising between the standard variable overhead absorbed for the actual units produced and the actual variable overhead expenditure incurred. See also Overhead Total Variance.
Variance in standard costing and budgetary control refers to the difference between the standard or budgeted levels of cost or income for an activity and the actual costs incurred or income achieved.
