benchmark
standard of performance that companies or managers can measure against
benchmarking
process of measuring the quality of a company's products, performance, or processes against specific standards
direct labor
hours spent producing a product or providing a service that can easily be traced to the product or service
direct materials
raw goods that can be traced directly to, or easily identified with, a product
direct materials price variance
difference between the standard (or expected) cost of materials for a process or project and the actual cost for the actual quantity of material purchased
direct materials quantity variance
difference between the actual amount of materials used in the production process and the amount that a company expected to use
fixed overhead
costs that stay constant no matter how much or how little a business produces
indirect labor
wages and benefits paid to workers who support the manufacturing process but do not actually create the product or service
labor efficiency variance
difference between a company's actual time used for production and the standard or projected time
labor rate variance
difference between the standard cost of work hours for a process or project and the actual cost paid for the actual number of hours
price variance
difference between the actual amount paid for an input and the standard amount that should have been paid, multiplied by the actual amount of input purchased
quantity variance
difference between how much input was actually used and how much should have been used
stakeholder
person who has an interest in a company; may include investors, employees, customers, union members, and community members
standard cost per unit
predetermined dollar amount that one item of a finished product should cost during an accounting period
standard cost variance
difference between how much a company predicted an expense would be and how much it actually is
standard hours per unit
amount of labor time that should be required to complete a single unit of output
standard price per unit
uniform cost for a good or service, based on its historical cost, its replacement cost, or an analysis of its competitive position in the market
standard quantity allowed
result of multiplying actual units of production by the standard material amount each unit requires
standard quantity per unit
amount of materials that should have been used to manufacture units of output during a period
variable manufacturing overhead
costs that are directly related to making goods but cannot be linked to one product. These costs rise or fall depending on how many items the business produces.
variable overhead
indirect costs as a result of manufacturing a product. These costs fluctuate based on how many units a company produces.
variable overhead efficiency variance
difference between the actual and budgeted hours worked, which is then applied to the standard variable overhead rate per hour
variable overhead rate
rate that is computed by dividing total variable overhead cost by expected number of standard hours for producing the product
variance
difference between an expected cost or output and an actual cost or output