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Q5E

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Financial & Managerial Accounting
Found in: Page 971
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Match the terms a through e with their correct definition 1 through 5.

a. Standard cost card 1. Quantity of input required under normal

conditions

b. Management by exception 2. Quantity of input required if a production process

is 100% efficient.

c. Standard cost 3. Managing by focusing on large differences from

standard costs.

d. Ideal standard 4. Record that accumulates standard cost

information.

e. Practical standard 5. Preset cost for delivering a product or service

under normal conditions.

a. Standard cost card 4.
b. Management by exception 3.
c. Standard cost5.
d. Ideal standard2.
e. Practical standard1.
See the step by step solution

Step by Step Solution

Step 1: Meaning of Managerial Accounting

Managerial accounting is that branch in which internal information of a business entity is accumulated and communicated with the managers to conduct various analyses and perform decision-making.

Step 2: Definition of standard cost card

A standard cost card refers to a report prepared by the management to record the information associated with standard cost. The managers further use such a report to compare the actual results and for the determination of variances.

Step 3: Meaning of management by exception

Management by exception refers to reviewing the operating and financing results of a business concern and comparing them with the desired outcomes. When discrepancies are found in the outcomes, such issues are further forwarded to the managers for their attention and initiation of cost control.

Step 4: Definition of standard cost

In the cost accounting branch, standard cost refers to the cost expected to be incurred by an entity to produce a specific product or service. Standard costs are further compared with the actual costs for applying cost control measures.

Step 5: Meaning of ideal standard

Ideal standards represent the standard cost for presenting perfection in the performance of a department/division. In this process, it is assumed by the management that there is no idle time and the work is conducted with 100% efficiency.

Step 6: Meaning of practical standard

In the accounting process, practical standards refer to the levels set by the management associated with a particular task when the working conditions and related environment is normal.

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