Chapter 9 notes PDF

Preview

Summary

Chapter 9 notes, contains bulleted list of important topics covered in the chapter....

Description

Cost Accounting Chapter 9 Notes Variance analysis cycle- companies use this to evaluate and improve performance. Cycle begins with the prep of performance reports in the accounting department, then the next periods operations are carried out and the cycle begins again with he prep of a new performance report for the latest period. Planning budget- prepared before the period begins and is valid only for the planned level of activity. Flexible budget- estimate of what revenues and costs should have been, given the actual level of activity for the period. Flexible budget adjusts to show what costs should be for the actual level of activity. Activity variances- the difference between a revenue or cost item in the flexible budget versus in the static planning budget Because of fixed costs, net operating income does not change in proportion to changes in the level of activity. Revenue variance- difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period. If actual revenue>what revenue should have been, variance is favorable and vice versa Spending variance- difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity. The most common errors in preparing performance reports are to implicitly assume that all costs are fixed or to implicitly assume that all costs are variable....