Module+15000+XI+Vocabulary

XI. Module 15000 Vocabulary ajh ** Chapter 9 part 1 Vocabulary **


 * __Control Limits__** – are set by the company and they specify the range of variances that are allowed. These are the highest and the lowest amount of variance that will be accepted.


 * __Currently Attainable Standards__**- the amount of product/service that can be produced with the current situation


 * __Direct Labor Efficiency Variance (LEV)__** – is the difference in the amount of direct labor hours that were used to create a certain amount of product and the amount that was estimated to be used for direct labor to produce that amount of product. LEV = (Actual Hours - Standard Hours) X Standard Rate = **(AH - SH) X SR**


 * __Direct Labor Rate Variance (LRV)__** – is the difference in the wages paid for direct labor to produce a certain amount of product and the amount that was estimated to be paid for direct labor to produce that amount of product.


 * __Direct Materials Usage Variance (MUV)__** – the difference in the total amount of materials used and the total estimated amount of materials to be used. It is calculated as: **(AQ – SQ)SP**


 * __Direct Materials Price Variance (MPV) -__** the difference in the total price of materials used and the total price of materials that were estimated to be used. Calculated as: **(AP – SP) AQ**


 * __Favorable variance (F)__** – a difference that is less than the amount estimated for the standard quantity or price


 * __Ideal Standards__** – the largest amount of product/service that can be produced if everything works as it should


 * __Kaizen Standards__** – under kaizen standards, a company is continuously trying to improve on the standards to lower the cost of a product/service. It is a Japanese term.


 * __Price Variance__** –also called a rate variance. The total price difference in standard price and actual price times the total amount of products/services that were used. **(SP - AP) X AQ**


 * __Standard Bill of Materials__ –** lists the amount of direct materials that are required to produce a certain amount of product


 * __Standard Cost__**– the estimated total cost of the product/service calculated as: Standard Price(SP) X Standard Quantity(SQ) = **SP X SQ**


 * __Standard Cost Per Unit__** – the estimated amount that it costs to produce one unit of a product which includes direct materials, direct labor, and overhead


 * __Standard Cost Sheet__** – shows the calculations used for standard cost per unit


 * __Standard Hours Allowed__** – the amount of hours that should have been worked to produce that actual amount of product. Standard Hours(SH) = **Standard Labor X Actual Output**


 * __Standard Price (SP)__**–the price that should be paid for a certain amount of material to be used for a product/service


 * __Standard Quantities Allowed__** - calculated as Standard Quantity(SQ) X Standard Hours(SH)= **SQ X SH**


 * __Standard Quantity (SQ)__** - the specific amount of material/service that should be used for a product/service


 * __Standard Quantity of Materials Allowed__** - amount of material that should have been used to produce the actual amount of product = Standard Quantity X Actual Output **= SQ X AQ**

[Actual Price(AP) X Actual Quantity(AQ)] – [Standard Price(SP) X Standard Quantity(SQ)] = **(AP X AQ) – (SP X SQ)**
 * __Total Budget Variance__** – the price difference in the real cost that was incurred and the standard cost that was estimated. It is calculated as:


 * __Unfavorable Variance (U__)** – a difference that is more than the amount estimated for the standard quantity or price


 * __Usage Variance__** – also called efficiency variance. The total difference in standard quantity and actual quantity **(SQ - AQ)** of material/service times the estimated price **(SP)** for one of those products/services.

Source:

(Cornerstones of Cost Accounting, 1st Edition, 2011. Don R. Hansen - Oklahoma State University and Maryanne M. Mowen - Oklahoma State University)