Managerial Accounting Chapter 23

Static Budget
A budget prepared for only one level of sales volume.
Variance
The difference between an actual amount and the budgeted amount; labeled as favorable if it increases operating income and unfavorable if it decreases operating income.
Static Budget Variance
The difference between actual results and the expected results in the static budget.
Flexible Budget
A budget prepared for various levels of sales volume.
Flexible Budget Variance
The difference between actual results and the expected results in the flexible budget for the actual units sold.
Sales Volume Variance
The difference between the expected results in the flexible budget for the actual units sold and the static budget.
Standard
A price, cost, or quantity that is expected under normal conditions.
Standard Cost System
An accounting system that uses standards for production costs-direct materials, direct labor, and manufacturing overhead.
Cost Variance
Measures how well the business keeps unit costs of material and labor inputs within standards.
Efficiency Variance
Measures how well the business uses its materials or human resources.
Management by Exception
When managers concentrate on results that are outside the accepted parameters.