Concepts Flashcards
What is prime cost
Direct materials
+
direct labour
Product/manufacturing costs include
Direct materials
direct labour
manufacturing overhead
Whats conversión cost
Direct labour
+
MOH
Schedule of COGM
MANUFACTURING COSTS:
Direct materials
+beg raw materials inv
+purchases
-less ending raw materials inv
Direct labour
MOH
+moh applied
COSTS OF GOOD MANUFACTURING:
+total manufacturing costs
+Add beg work in progress
-Deduct end work in progress
COGS
cost of goods manufactured
Add beg finished goods Inv
Deduct end finished goods inv
+underaplied overhead
Contribution margin
Sales -variable cost
Contribution margin ratio
CM ratio=CM/sales
Break even point (units)
=fixed costs/CM per unit
Break even (dollars)
Break even sales=fixed costs /CM ratio
HIGH-low method (variable cost per unit)
Variable Cost=Change in Cost/Change in Activity
Total Mixed Cost:
Y=a+bXY=a+bX
Contribution Margin (CM) description
the amount remaining from sales revenue minus variable expenses have been deducted.
variable expense ratio
(amount of sales going to variable expenses)
total variable cost / sales
Change in CM
CM Ratio × Change in Sales
Formula for units sold to reach target profit:
selling goal per unit:
(Fixed Costs + Target Profit) / CM per unit.
Formula for sales dollars to reach target profit:
sales revenue goal:
(Fixed Costs + Target Profit) / CM Ratio.
Margin of Safety
Actual Sales – Break-even Sales
Percentage Margin of Safety:
(Margin of Safety / Actual Sales).
break even units (more than one product sold)
Total Fixed Costs / Weighted Average CM per unit.
Formula for units to reach target profit:
(Fixed Costs + Target Profit) / CM per unit.
Formula for sales dollars to reach target profit:
(Fixed Costs + Target Profit) / CM Ratio.
High fixed costs resulting in?
lead to higher operating leverage, meaning more risk but greater potential for profits in good years.
Job Cost Sheet definition
- tracks costs associated with a specific job, including product costs
- summarizes the costs and provides basis for cost accounting
Predetermined Overhead Rate: POHR
= estimated overhead cost / estimated allocation base
total overhead cost per job (applied)
direct labour hours x POHR
work in progress ending balance formula. ABC costing
WIPEndingBalance=
WIPBeginningBalance+
DirectMaterials used+
DirectLabour used+
AppliedManufacturingOverhead
(MOH) +
what do you do with underapplied moh and overapplied moh
underapplied =
debit the difference to COGS (the underapplied)
credit MOH
over applied =
credit the difference to COGS (the overapplied)
debit MOH
formula for under applied OH
underapplied oh = actual oh - applied oh
formula for overapplied OH
overapplied oh
= applied oh - actual oh
applied OH formula
applied OH = POHR x AMH (actual machine hours)
how do you know if its under or over applied
if actual is higher than applied = underapplied
if actual is less than applied = over applied
when there were more moh costs than estimated, what is it called?
underapplied moh
when there were less MOH costs than estimated what is it called?
overapplied moh
Activity Rate in ABC:
Total cost of activity pool / total activity measure (e.g., machine-hours or orders).
Levels of Activity in ABC:
a. Unit-Level: Performed each time a unit is produced (e.g., power consumption).
b. Batch-Level: Performed once per batch, regardless of the batch size (e.g., machine setup).
c. Product-Level: Activities for specific products (e.g., product design).
d. Customer-Level: Activities for specific customers (e.g., customer support).
e. Organization-Sustaining: Activities that support the organization as a whole, regardless of production or sales (e.g., factory maintenance, executive salaries).
total cost of product formula under absorption costing
Direct materials per product+ direct labour per product + MOH per product
steps for Calculation to get total cost per job completed
- Get activity rate, multiply it by the applicable activity incurred
- Add up all the costs
break even price per unit. Job costing
(direct costs + MOH per job)/units required for the job to complete
Absorption Costing 5 characteristics
a. Treats all manufacturing costs (fixed and variable) as product costs.
b. Unit cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead.
c. Fixed overhead is deferred into inventory until the product is sold.
d. Required for external financial reporting (GAAP).
e. Increased production (even if units aren’t sold) increases reported income due to deferred fixed costs.
Variable Costing:
a. Only variable manufacturing costs are treated as product costs.
b. Unit cost = Direct materials + Direct labor + Variable manufacturing overhead (Fixed manufacturing overhead is a period cost).
c. Fixed manufacturing overhead is expensed in the period incurred, not tied to the number of units produced.
d. Easier for internal decision-making and CVP (Cost-Volume-Profit) analysis because it clearly separates variableand fixed costs.
Selling and administrative expenses are always treated as period costs, regardless of method.
Formula for Reconciliation:
a. Variable Costing Income+Fixed MOH Deferred (or Released)=Absorption Costing Income
i. Deferred costs: When production > sales (inventory increase). ii. Released costs: When sales > production (inventory decrease).
Final oh cost deffered formula
Final oh cost deffered = (MOH per unit) x (units ending inventory)
fixed moh PER UNIT formula
total fixed moh / units produced
ending invetory value in dollars formula for income statement under variable costing
units in ending inventory * variable cost per unit (dm+dl+dmoh)
What does CRM stand for?
Customer Relationship Management.
Describe the 80/20 Rule in CRM.
20% of customers generate 80% of profits.
Key elements of a customer-centric approach?
Identification, differentiation, interaction, customization.
What is Collaborative CRM?
ntegrates all customer interactions (marketing, sales, service).
What does RFM stand for in CRM?
Recency, Frequency, Monetary value.
List the CRM process steps.
Target customers → Segment into high/low-value → Reduce churn.
Difference between CRM strategy and CRM system?
customer focus; System = tools supporting strategy.
Define Customer Touch Points.
Methods of customer interaction: traditional (calls) & digital (web, email).
What is the 360-degree view in CRM?
Complete, integrated customer data accessible to all employees.
Three phases of CRM evolution?
Reporting, Analysis, Predicting.
Operational CRM vs. Analytical CRM?
Operational = front-office interactions; Analytical = back-office data analysis.
Examples of Customer-Facing CRM?
Call centers, sales force automation (SFA), marketing campaigns.
Examples of Customer-Touching CRM?
Self-service options like FAQs, loyalty programs, chatbots.
Role of AI in CRM?
Insights, automated support, lead scoring, sentiment analysis.
Define Cross-Selling.
Recommending related products based on past purchases.
Example of CRM metrics?
Customer retention, revenue per customer, service costs.
What is Upselling?
Offering higher-value or premium products to customers.
