achievable standards

A standard that takes into account normal spoilage and inefficiency; intended to allow workers to reach the established benchmarks

balanced scorecard

A set of performance measures that are congruent with assessing improvement in financial, customer, and business process outcomes

centralized decision making

A business style where top leaders make and direct most important decisions

common fixed costs

Fixed costs that are incurred to support more than one business unit

cost center

An area of responsibility under the control of a manager who is responsible for costs incurred within the unit; the unit generally has little revenue function

decentralized decision making

A business style where top leaders concentrates on strategy, and leaves day-to-day operation and decision-making tasks to lower-level personnel

direct labor efficiency variance

A variance comparing standard hours of direct labor to the actual hours worked; measured at the standard rate per hour [(standard hours - actual hours) X standard rate]

direct labor rate variance

A variance that reveals the difference between the standard rate and actual rate for the actual labor hours worked [(standard rate - actual rate) X actual hours]

fixed overhead spending variance

A fixed overhead variance that compares actual fixed overhead to the budgeted fixed overhead

fixed overhead volume variance

A fixed overhead variance that compares the budgeted fixed overhead to the fixed overhead that is applied to production based on standard fixed overhead per unit of output

ideal standards

A standard that could only be achieved under perfect operating conditions; such standards are rarely expected to be achieved

investment center

A evaluative unit where managers are accountable for cost and profit outcomes, including consideration of the amount of capital that is deployed to achieve those outcomes

management by exception

A management focus of attention on areas where corrective measures appear necessary

materials price variance

A variance that reveals the difference between standard price for materials purchased and amounts actually paid for those materials [(standard price - actual price) X actual quantity].

materials quantity variance

A variance comparing standard quantity to actual quantity of materials; variation is measured at the standard price per unit [(standard quantity - actual quantity) X standard price]

profit center

Business unit that has control over both costs and revenues and is therefore evaluated on the profit outcomes

responsibility center

The part of an organization under the control of a manager

return on investment

ROI: A model consisting of a margin component (Operating Income/Sales) and turnover component (Sales/Average Assets); reduces to Operating Income/Average Assets

standard cost

A measure of what costs should be incurred to achieve the observed output

traceable fixed costs

Fixed costs that would not exist if the unit under evaluation ceased to exist

variable overhead efficiency variance

A variance that reflects the level of efficiency associated with the application of variable overhead to production

variable overhead spending variance

A variance that reflects the difference between actual variable overhead and standard variable overhead associated with the actual units of the application base