Operational Performance Measurement Flashcards
What is operational control?
It focuses on short-term operational performance by monitoring business processes.
What is a management accounting and control system?
An organization’s core system for performance measurement and goal monitoring.
What is a variance in operational control?
The difference between budgeted and actual financial results.
What is a standard cost system?
An accounting system where standard costs are recorded formally and used for budgeting, control, and performance evaluation.
What is a standard cost?
A carefully determined cost that a firm should incur under relatively efficient conditions, expressed per unit of output.
What is an authoritative standard?
A standard determined primarily by management without employee input.
What is a participative standard?
A standard developed with the active participation of employees.
How is climate change impacting supply chains?
Extreme weather increases costs; companies work on resilience, like Starbucks supporting sustainable farming.
What factors affect the standard cost for direct materials?
Quality, quantity determined by engineering and production, and price set through supplier negotiation.
What factors affect the standard cost for direct labor?
Wage rates, fringe benefits (health insurance, pensions), and payroll taxes.
What does a standard cost sheet include?
Price and quantity components for each cost element.
What accounts are used in a standard cost system?
Direct Materials Inventory, Accrued Payroll, Factory Overhead, WIP Inventory, Finished Goods Inventory, and COGS.
How are favorable and unfavorable variances recorded?
Favorable variances have credit balances; unfavorable variances have debit balances.
How is direct material purchase recorded in a standard cost system?
Materials Inventory (AQ × SP) and Materials Purchase Price Variance are recorded against Accounts Payable (AQ × AP).
How is direct material usage recorded in a standard cost system?
WIP Inventory (SQ × SP) and Materials Usage Variance are recorded against Materials Inventory (AQ × SP).
How are standard costs used even without a full standard cost system?
They support end-of-period financial control through variance analysis.
