UT Knoxville ACCT 200 - Chapter 13
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ACCT 200 Outline of Last Lecture I. Movement of GoodsII. Factory LaborIII. FOH RateOutline of Current Lecture I. Budgeting BasicsII. Incremental budgetingIII. Zero Based budgetingIV. Standards versus ActualsV. Variance analysisCurrent LectureI. Budgeting Basicsa. Planning  Directing  ControllingII. Incremental budgeting—based on adjustments from past years and an increase for inflationa. Budgets introduce incentivesb. Fosters Budgetary slack—build in slack room into budgetc. Fosters Overspending—“spend it or lose it” mindsetIII. Zero Based budgeting—budgeting from scratch (rarely done unless involving a new business)IV. Standards versus Actualsa. Standard price—the budgeted priceb. Standard Cost = Standard Price x Standard Quantityc. Actuals—what the real numbers are (actual price paid, quantity produced)V. Variance analysisa. Favorable—good comparisonb. Unfavorable—bad comparisonc. **We won’t use variances in FOHd. VERY IMPORTANT Variances = Actuals – Standardsi. Negative variancesfavorable (coming in under budget)ii. Positive variances unfavorable (coming in over budget)e. DM Price Variance = AQ (AP – SP)i. Actual quantity (actual price – standard price)f. DM Quantity Variance = SP (AQ – SQ)These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.i. Standard price (actual quantity – standard quantity)g. DL Rate Variance = AT (AR – SR)i. Actual time (actual rate – standard rate)h. DL Time Variance = SR (AT – ST)i. Standard rate (actual time – standard time)i. Total Variance = Rate Variance + Time

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