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A standard can be thought of as a budget for one unit of product. Standards, as used in variance analysis, have two advantages: They seek to exclude past ...
Typology: Exercises
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HHorngren 13e 13
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Learning Objective 1: Distinguish a static budget... the master budget based on output planned at start of period from a flexiblep p p budget... the budget that is adjusted (flexed) to recognize the actual output level
Learning Objective 1: Distinguish a static budget... the master budget based on output planned at start of period from a flexiblep p p budget... the budget that is adjusted (flexed) to recognize the actual output level
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Learning Objective 2: Develop a flexible budget... proportionately increase variable costs; keep fixed costs the same and compute flexible-budget variances.. .p p g flexible-budget variance Æ the difference between an actual result and a flexible-budget amount… sales-volume variances Æ each sales-volume variance is the difference between a flexible-budget amount and a static-budget amount
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Learning Objective 3: Explain why standard costs are often used in variance analysis... standard costs exclude past inefficienciesy p and take into account future changes
Learning Objective 4: Compute price variances... each price variance is the difference between an actual input price and a budgetedp p g input price and efficiency variances... each efficiency variance is the difference between an actual input quantity and a budgeted input quantity for actual outputq y g p q y p for direct-cost categories
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Learning Objective 5: Understand how managers use variances... managers use variances to improve future performance
Learning Objective 6: Perform variance analysis in ABC systems... by comparing budgeted costs and actual costs of activities
Learning Objective 7: Describe benchmarking and explain its role in cost management... benchmarking compares actual performance against the best levels of performance
The following is United AirlineThe following is United Airline s benchmark cost comparison with its 8’s benchmark cost comparison with its 8 competitors. Calculations are based on available seat miles (ASM).
