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C250 C&M Acc
Cost and Managerial Accounting
| Term | Definition |
|---|---|
| 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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