FNEC 2600 Chapter 10 Notes
Standard Costing: A Managerial Control Tool
Standards: Performance goals (not always monetary)
With production departments, performance is often evaluated within a Standard
Cost System. A standard cost system is designed to use
FNEC 2600 Chapter 13 Notes
Short-Run Decisions: Relevant Costing
Differential Analysis (The Decision-Making Model) Effect of alternative
courses of action on relevant revenues and costs. In other words: a financial
comparison between alternat
FNEC 2600 Chapter 8 Notes
Absorption vs. Variable Costing & Inventory Mgt.
Responsibility Centers Unit/Segment that is held accountable for budgeted
costs and/or revenues.
1. Cost Center only incurs costs. Usually includes production departments
FNEC 2600 Chapter 9 Notes
Profit Planning (Budgeting)
Objectives of Budgeting:
Establish specific goals (planning)
Provide information for decision making
Standards for performance evaluation (controlling)
FNEC 2600 Chapter 12 Notes
Performance Evaluation & Decentralization
Centralization vs. Decentralization
Centralized Company Top mgt. makes the bulk of operating decisions for the
entire company. Lower levels of mgt. implement those decisions.
FNEC 2600 Chapter 5 Notes
1. Job-Order Costing Product costs are maintained/recorded for each batch or
job separately. Used when goods are produced in batches or for special orders.
Unit Cost = Total job costs / Output (e.g.
FNEC 2600 Chapter 3 Notes
Cost Behavior Whether a cost increases or decreases as levels of output change.
Output Measure or Cost Driver what causes a cost to change. It could be the
number of units produced, number of labor hours, number of
FNEC 2600 Chapter 11 Notes
Flexible Budgets and Overhead Analysis
Performance Reports: Reports containing a comparison of actual results to
budgeted results (a form of variance analysis)
1. Static Budget A budget that does NOT reflect the imp