Data – facts gathered and stored.

No clear meaning unless processed – analysed and sorted – into

information.

Total direct costs – prime costs

Total indirect costs – overheads

Pearson’s correlation - +1 ideal positive, -1 ideal negative.

Least square linear regression – complicated formulas

Correlation coefficient – another weird formula

Coefficient of determination – square of coefficient of correlation.

Absorption overheads – total overheads by total production = overhead cost per unit

Charging supervisors salaries to the relevant departments is allocation of overheads.

Splitting of sharing of overheads between departments is apportionment of overheads.

Reapportion:
-continuous or repeated distribution method
-algebraic method

Overhead absorption rate is based on budgeted amounts.

Amount absorbed is actual units/hours * overhead absorption rate
Amount under absorbed = actual overheads – amount absorbed

Marginal costing – we focus on variable costs, fixed costs are added later on.
Inventory is valued at marginal cost.
Contribution is selling price less all variable costs (production and non-production).
Absorption cost is hidden in inventory value.

Full cost pricing – we add fixed overheads

Mark-up = profit as percentage of costs
Margin = profit as percentage of selling price.

Full cost plus pricing – mark-up on the marginal cost (no fixed overheads)

Principal budget factor – factor that limits the company taken into consideration when choosing
which budget to prepare as first.

Original budget – based on numbers

Flexible (flexed) budget – actual amounts budgeted prices
Actual budget – actual amounts actual prices.

So… flexible budget tells us total variances. But it doesn’t go deeply into details. This is why we use
standard costs budget and variance analysis.
AQxAP AQxSP SQxSP
price var. quantity var.
If purchase does not equal quantity used we take purchased value for price variance, used quantity
for quantity variance. We can not calculate total variance.

Fixed overhead variance – don’t understand. To be continued.

Material usage variance – standard usage for actual production

Material variance – expense, usage

Labour variance – rate of pay, idle time, efficiency
Variable overheads – expenditure, efficiency
Sales – price and volume variance (in volume variance we take contribution, not selling price)

Mission statement – overall purpose of organisation. Purpose, strategy, policies and standards,
values.
Goals – statements of general intentions
Objectives are more specific.

CSFs – critical success factors – performance requirements that are most fundamental to being
successful.
KPI – Key Performance Indicator.

Return on capital employed – gross profit we made during the year / the whole money we pumped
into the business

Net profit margin = gross profit / revenue

Asset turnover = revenue / whole money pumped into.

Return of capital employed = net profit margin * asset turnover.

Gross profit margin = gross gross profit / revenue

*money pumped = capital, reserves, long-term liabilities

Variability – divergence of data from its mean value.

Simultaneity – double entry – happens at the same time.
Perishability – goods can’t be stored or kept for future use.