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C250 C&M Acc

Cost and Managerial Accounting

Product Costs DM + DL + FOH Inventory, which goes on the Balance Sheet COGS, which goes on the Income Statement
Period Costs Selling Expenses + Administrative Expenses
Total Manufacturing Costs Direct Materials + Direct Labor + Applied Mfg Overhead
Prime Cost Direct Materials + Direct Labor
Conversion Cost Direct Labor + Manufacturing Overhead
Mixed Cost Line Formula Y = a + bX Y = Estimated total manufacturing overhead cost a = Estimated total fixed manufacturing overhead cost b = Estimated variable manufacturing overhead cost per unit of allocation base X = Estimated total amount of allocation base
Traditional Format Income Statement Sales (-) Cost of goods Sold = Gross Margin (-) Selling & Admin Expenses = Net Operating Income
Contribution Format Income Statement Sales Revenue (-) Variable Expenses = Contribution Margin (-) Fixed Expenses = Net Income from Operations
Job Order Cost DM used + DL + Applied MOH
4 Steps To Compute Predetermined Overhead Rate 1. Estimate denominator. Total amount of allocation base 2. Estimate the total fixed manufacturing overhead costs for the coming period. 3. Use Y = a + bX to estimate the total amount of manufacturing overhead 4. Compute the predetermined overhead rate
Predetermined Overhead Rate (POR) Allocates a certain amount of manuf overhead to each direct labor or machine hour Helps companies allocate resources and set pricing Estimated Overhead Costs / Estimated Activity Base
Overhead Applied Overhead expenses that have been applied to units of a product during a specific period POR x Actual Units Of Allocation Base
Under/Over Applied Manufacturing Overhead Actual Manufacturing Overhead - Applied Manufacturing Overhead
Cost of Goods Manufactured (COGM) Beg WIP + DM Used + DL + Applied Manuf Overhead - End WiP
Unadjusted Cost of Goods Sold Beginning Fin Goods Inv + COGM - End Fin Goods Inv
Adjusted COGS Beg Fin Goods Inv + COGM - End Fin Goods Inv +/- Under/Over Applied Manuf Overhead OR COGS +/- Under/Over Applied Manuf Overhead
Ending Finished Goods Inventory Beginning Finished Goods Inventory + COGM - COGS
Gross Margin Sales revenue a company retains after incurring direct costs involved Sales - COGS
Process Costing Steps 1. Calculate Equivalent Units of Purchase 2. Calculate Cost Per Equivalent Units of Purchase 3. Calculate Cost Completed and Transferred Out 4 Calculate Cost of Ending WIP
Equivalent Units Number of partially completed units x % completion
Equivalent units of production (weighted-avg method) Partially completed units expressed in terms of finished goods Units transferred to the next department or to finished goods + equivalent units in ending WIP
Cost per equivalent unit (Weighted-avg method) (Cost of beginning work in process inv + cost added during period) / equivalent units of production
Cost Of Units Completed & Transferred Out Units transferred out of Department x Cost per Equivalent Unit
Cost of Ending WIP Ending WIP Equivalent Units x Cost Per Equivalent Unit
Units Transferred Beg Inventory + Units Started - Ending Inventory
Costs To Be Accounted For Beginning work in process inv + cost added during the period
Costs Accounted For Costs of Units Transferred Out + Ending WIP
Contribution Margin per Unit (CMU) Incremental money generated for each product/unit sold after deducting the variable portion Sales Price per Unit - Variable Cost per Unit
Contribution Margin Per Unit of Constrained Resource CM Per Unit / Amount Required To Produce 1 Unit
Variable Cost Per Unit Production cost for each unit produced that is affected by changes in a firm's output or activity level (Materials + Labor + Variable Costs) / Number of Units
Relevant Cost To Make Avoidable costs that are incurred only when making specific decisions Variable Costs + Avoidable Fixed Costs
Segment Margin Amount of net profit or net loss generated by a portion of a business Contribution Margin [(sales revenue - variable costs)] - Avoidable Costs + Keep - Lose
Incremental profit Profit gain or loss associated with a given managerial decision Incremental Revenue - Incremental Processing Costs + Process Further - Sell It
Budgeted Production How much to produce to reach desired sales Budgeted Sales + Desired End Inventory - Beg Inventory
Budgeted Sales in Units Revenue / Selling Price Per Unit
Net Income Sales Revenue - COGS - Selling and Administrative Expenses
Net Operating Income or Profit Sales - Variable Expenses - Fixed Expenses OR (CM Ratio x Sales) - Fixed Expenses
Break-Even Point in Dollars (BEP $) Fixed Costs / Overall CM Ratio CMR = Total CM / Total Sales
Break-Even Point in Units (BEP Units) Fixed Expenses / CMU CMU = Selling Price Per Unit - Variable Cost Per Unit
Contribution Margin Ratio Difference between a company's sales and variable costs, expressed as a percentage Sales Price per Unit - Variable Cost per Unit
Change In Contribution Margin CM Ratio x Change In Sales
Unit Sales to Attain Target Profit (Target Profit + Fixed Expenses) / Unit CM
Dollar Sales to Attain Target Profit (Target Profit + Fixed Expenses) / CM Ratio
Margin of Safety (MS) MS $ / Total Budgeted (or Actual) Sales in Dollars
Margin of Safety in Dollars (MS $) Total Budgeted (or Actual) Sales - Break Even Sales,
Margin of Safety Percentage (Budgeted Sales - Break-Even Sales) / Budgeted Sales
Contribution Margin Sales Revenue - Variable Costs OR CM Ratio x Sales
Degree of Operating Leverage (DOL) Measures how much the OI will change in response to change in sales Contribution Margin / Net Operating Income
Percentage Change in Net Operating Income (%∆ NOI) DOL x Percentage Change in Sales
Overall CM Ratio Shows CM as a percentage of each dollar of sales Total CM / Total Sales
Profit or Net Operating Income (from Units) (Unit CM x Qty of Units) - Fixed Expenses
Profit or Net Operating Income (from CM Ratio) (CM Ratio x Sales) - Fixed Expenses
Materials Price Variance Difference between the actual cost of direct materials and the standard cost of quantity purchased or consumed AQ(AP - SP)
Materials quantity variance Difference between actual amount of materials used and amount that was expected SP x (AQ - SQ)
Labor Rate Variance (LRV) Difference between actual cost of DL and Standard cost AH x (AR - SR)
Labor Efficiency Variance (LEV) Difference between actual hours worked and budgeted hours that should have been worked based on standards. Budgeted vs. Actual SR x (AH - SH)
Variable Overhead Efficiency Variance Difference between actual hours worked at standard rate and standard hours allowed at standard rate SR x (AH - SH)
Variable Overhead Rate Variance Difference between actual variable manuf. overhead and the variable overhead that was expected given number of hours worked AQ x (AR - SR)
Variable Overhead Rate AH x (SP - AP)
Standard quantity allowed for actual output Actual Output x Standard Quantity
Return on Investment (ROI) Measures if the gains compare favorably to the costs Net Operating Income / Average Operating Assets OR Margin / Turnover Margin = Net Operating Income / Sales Turnover = Sales / Average Operating Assets
Margin Measures profitability Net Operating Income / Sales
Residual Income (RI) NI after all costs are paid down. Amount of profit that exceeds its required rate of return Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return)
Turnover How much operating profit is being produced for each dollar of sales Sales / Average Operating Assets
Throughput Time (Mfg Cycle) Time it takes for a product to be produced (does not include Wait Time) Process Time + Inspection Time + Move Time + Queue Time
Delivery Cycle Time Time span of acceptance of an order to delivery Throughput Time + Wait Time
Manufacturing cycle efficiency (MCE) Measures the proportion of production time spent on value-added activities Value-Added Time (Process Time) / Throughput (Manufacturing Cycle) Time OR Process Time / Manufacturing Cycle
Variable vs. Absorption Costing VC = Cost of unit only includes the variable manuf. costs AC = Cost of unit includes variable manuf. costs AND fixed manuf. costs VC = Fixed is shown as Expense on IS AC = Fixed is in the calculation
Absorption Cost Per Unit VC Per Unit + (Fixed Costs / Units Produced)
Activity Variance Measures actual vs. planned of an item or activity Flexible Budget - Planning Budget
Revenue and spending variances Measures differences between actual and expected Actual Results - Flexible Budget
Flexible budget Cost + (Unit Price x Actual Level of Activity)
Planning budget cost + (unit price x planned level of activity)
Flex Budget > Plan Budget Actual Revenue > Flex Budget Actual Expense > Flex Budget Unfavorable Favorable Unfavorable
Variable Expense Ratio Variable Expenses / Sales
Break Even Analysis - Equation Method Profit = Unit CM x quantity sold - Fixed expenses
High-Low Method of Analysis 1. (Highest Costs - Lowest Costs) / (Qty of Highest Costs - Qty of Lowest Costs) 2. Answer from 1 x Total Cost = Variable Cost Element 3. Total Cost - Variable Cost Element
4 Sections of the Cash Budget Cash Receipts Cash Disbursements Cash in Excess or deficiency Financing Section
Excess (deficiency) of cash available over disbursements Beginning cash balance + cash receipts - cash disbursements
Cost Center A segment whose manager has control over costs, but not over revenues or investment funds.
Profit Center a business segment whose manager has control over cost and revenue but has no control over investments in operating assets
Investment Center A segment whose manager has control over costs, revenues, and investments in operating assets.
Created by: cnmeastman
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