Cost Accounting

Question 1

Formula: Break Even

units, $, and Profit/Loss

Answer 1

BE Units = Fixed Costs/ (Salesprice - Variable costs)

BE $ = Fixed Costs / Contribution Margin

BE Units w/ Prof./Loss = (fixed Cost + profit or - |oss) / (sales price - Variable Costs)

Question 2

Formula: Margin of Safety

Answer 2

Total Sales - Break Even

Question 3

Formula: Main Total Cost

Answer 3

y=A+B(x)
TC = Fixed + Variable (x)

Y = Total Cost
X = volume (cost driver) 
A = fixed costs 
B = variable cost per unit

Question 4

Formula: High - Low Method

Ex: Total Cost Hours
110 30
80 20

Answer 4

(High-low) Cost / (High-low) Hrs.

TC = 110 - 80 = 30

Hours = 30 - 20 = 10

30 / 10 = 3 Note: this will be the (x) in the “Total Cost” formula. EX: variable (x)

Question 5

Manufacturing Costs

also: which ones are PRIME and CONVERSION

Answer 5

• DM: direct materials
• DL: direct labor
• Mfg. OH: all factory costs except DM and DL
- indirect materials: Ex: sandpaper/cleaning supplies
- indirect labor: Ex: shop mgr. Salaries (peanut at mill)

Question 6

Prime Costs and Conversion Costs

Answer 6

Prime = DM + DL

Conversion = DL + Mfg. OH

Question 7

Non-Mfg. Costs

Answer 7

• PERIOD Costs
• Selling, General, and Admin
• Marketing costs, freight out, re-handling costs
• expense in the period
• Abnormal spoilage

Question 8

Cost Systems (3 Types)

Answer 8

• ACTUAL
- DM, DL, & Mfg. OH

• STANDARD
- All Costs based on Standards)

• NORMAL
- DM & DL based on ACTUAL, Mfg. OH based on Stds.

Question 9

Formula: Predetermined OH

and Applied OH

Answer 9

Est. oh costs / Est. DL $hrs = Predetermined OH Rate

Predetermined OH Rate X Actual Production
= Applied OH

Question 10

Formula: Flow of a Cost System - Raw Materials

Answer 10

Beg RM
\+ Purchases
= Available
(Ending RM)
= Materials used

Question 11

Formula: Flow of a Cost System - WIP

Answer 11

Beg. WIP
\+ DM used (from Raw Mat. calculation)
\+ DL 
Applied M0/H
= WIP Available
(Ending WIP)
= CoGM (mfg. / completed)

Question 12

Formula: Flow of a Cost System - FINISHED GOODS

Answer 12

Beg FG
\+ CoGM
= FG Avail.
(Ending FG)
= CoGs

Question 13

Formula: Flow of a Cost System - COGS

Answer 13

CoGS
+ Underapplied
(Overapplied)
= CoGS

Question 14

Formula: Absorption/ Full Costing

Remember: fixed mfg. Oh in period which fixed oh applied units are sold

Answer 14

Sales
(Var. cogs)
( Fix cogs)   sn. included in Absorption NOT Variable
= Gross Margin
(Var. SGA)
(Fix SGA)
= Operating Income

Question 15

Formula: Variable Costing

Remember: fixed mfg. oh expensed in period incurred

Answer 15

Sales
(Var. cogs)
(var. sga)
= CM
(Fix Mfg. Costs)
(Fix sga)
= Operating Income

Question 16

Which method of Costing has greatest amt. of Operating Income

• Ending Inventory > Beginning Inventory
• Ending Inventory < Beginning Inventory

Answer 16

• Absorption

* Variable