BEC chpt 1 & 2 - Becker Flashcards
Name 3 components of product cost
- Direct Materials (DM)
- Direct Labor (DL)
- Manufacturing Overhead (MO)
Prime Cost
DM + DL
Conversion Costs
DL + MO
Product Cost
Inventoriable; they become cost of goods sold when sold
Period Cost
Expensed in the period incurred as they are not inventoriable
Name the 3 objectives of an entity’s cost accounting system (PIE)
- Product Costing
- Income Determination
- Efficiency Measurements
Determine the traditional overhead rate
Budgeted manufacturing OH costs / estimated cost driver
Direct method for allocating service costs in ABC
each svc dept costs are allocated to the production departments but not to other service departments.
Step down method for allocating service costs in ABC
a sequential approach is used to allocate svc dept costs to production and other svc departments.
Contribution Margin Calculatiom
Sales - variable costs
Contribution Approach Equation
Revenues - variable costs = contribution margin - fixed costs = net income
Profit
Sales - variable costs - fixed costs
Absorption Approach Equation
Revenues - cogs = gross margin - operating expense = net income
Unit contribution margin
Contribution margin / units
Contribution margin ratio
Contribution margin / revenues
Special order full capacity decision
Price > vc per unit + opportunity cost
Special order w/ excess capacity decision
Price > vc per unit
Sales dollars needed to get desired profit
Vc + fc + pretax profit
Sales units needed to get desired profit
Fc + pretax profit / contribution margin per unit
Break even point in dollars methods
Total fc / contribution margin ratio
Or
Unit price x break even point in units / break even in dollars
Break even point in units
Total fc / contribution margin per unit
Traditional Costing Steps (overhead applied)
#1 Budgeted overhead cost / Estimated cost driver (DL$, DLhrs, Mhrs) = overhead rate #2 Actual cost driver x overhead rate = applied overhead
Cost Drivers
Direct labor $
Direct labor hours
Machine hours
Direct Material Used Calc
Begin Raw Material \+Purchases = Material Available - Ending Raw Material = Material Used
Joint Products
Two or more main products that are generated from a common input
Gross Margin =
Sales less COGS
Relative Sales Value at Split Off
Sales price less the cost to complete OR the additional contribution to income generated by completing the product.
Cost per unit calculation
Total costs / saleable units = cost per unit
