Balanced scorecard:
An integrated set of performance measures that is derived from and supports the organization's strategy.
Bill of materials:
A document that shows the type and quantity of each major item of materials required in making a product.
Delivery cycle time:
The amount of time required from receipt of an order from a customer to shipment of the completed goods.
Ideal standards:
Standards that allow for no machine breakdowns or other work interruptions and that require peak efficiency at all times.
Labour efficiency variance:
A measure of the difference between the actual hours taken to complete a task and the standard hours allowed, multiplied by the standard hourly labour rate.
Labour rate variance:
A measure of the difference between the actual hourly labour rate and the standard rate, multiplied by the number of hours worked during the period.
Management by exception:
A system of management in which standards are set for various operating activities, with actual results then compared to these standards. Any differences that are deemed significant are brought to the attention of management as "exceptions."
Manufacturing cycle efficiency (MCE):
Process (value-added) time as a percentage of throughput time.
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.
Materials 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.
Mix variance:
The dollar effect of a difference between the actual mix of materials and the budgeted mix of materials on total material cost.
Practical standards:
Standards that allow for normal machine downtime and other work interruptions and that can be attained through reasonable, though highly efficient, efforts of the average worker.
Standard cost card:
A detailed listing of the standard amounts of materials, labour, and overhead that should go into a unit of product, multiplied by the standard price or rate that has been set for each cost element.
Standard cost per unit:
The standard cost of a unit of product as shown on the standard cost card; it is computed by multiplying the standard quantity or hours by the standard price or rate for each cost element.
Standard hours allowed:
The time that should have been taken to complete the period's output as computed by multiplying the actual number of units produced by the standard hours per unit.
Standard hours per unit:
The amount of labour time that should be required to complete a single unit of product, including allowances for breaks, machine downtime, cleanup, rejects, and other normal inefficiencies.
Standard price per unit:
The price that should be paid for a single unit of materials, including allowances for quality, quantity purchased, shipping, receiving, and other such costs, net of any discounts allowed.
Standard quantity allowed:
The amount of materials that should have been used to complete the period's output as computed by multiplying the actual number of units produced by the standard quantity per unit.
Standard quantity per unit:
The amount of materials that should be required to complete a single unit of product, including allowances for normal waste, spoilage, rejects, and similar inefficiencies.
Standard rate per hour:
The labour rate that should be incurred per hour of labour time, including employment taxes, fringe benefits, and other such labour costs.
Throughput time:
The amount of time required to turn raw materials into completed products. Throughput time is also known as Cycle time.
Variable overhead efficiency variance:
The difference between the actual activity (direct labour-hours, machine-hours, or some other base) of a period and the standard activity allowed, multiplied by the variable part of the predetermined overhead rate.
Variable overhead spending variance:
The difference between the actual variable overhead cost incurred during a period and the standard cost that should have been incurred based on the actual activity of the period.
Variance:
The difference between standard prices and quantities on the one hand and actual prices and quantities on the other hand.
Yield variance:
The portion of the efficiency variance which is not the mix variance. It occurs when the actual yield differs from the standard yield expected from a given mix of inputs.
