AFM102 Chapter Notes - Chapter 10: Management Accounting, Variable Cost, Fixed Cost

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Management by exception: a system of management in which standards are set for various operating activities which are then periodically compared to actual results. But others say that these standards are discouraging and have little meaning. 10 standard costs (3): # of units used times cost per unit times standard price total variance is not computed because the amount purchased is diff. than the amount used. Materials price variance: a measure of the difference between the actual unit price paid for an item and the standard price, multiplied by the quantity purchased (aq ap) (aq sp) Material quantity variance: a measure of the difference between the actual quantity of materials used in production and the standard quantity allowed, multiplied by the standard price per unit of materials (aq sp) (sq sp) Aq: actual quantity purchased; sq: standard quantity allowed for actual output; sp: standard price.

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