Exam 3 (Ch 20, 21, 22) Flashcards
FORMULA: Conversion Cost
= DL + MOH
A short-term financial plan used to coordinate the activities needed to achieve the short-term goals of the company
operational budget
Method used to determine the average cost of equivalent units of production by combining beginning inventory costs with current period costs
Weighted-Average Method
A report prepared by a processing department for equivalent units of production, production costs, and the assignment of those costs to the completed and in process units.
Production Cost Report
Used to measure the amount of materials added to or work done on partially completed units and expressed in terms of fully completed units.
Equivalent Units of Production (EUP)
An accounting system that accumulates costs by process;
Used by companies that manufacture identical units through a series of uniform production steps or processes.
Process Costing System
The cost to convert raw materials into finished goods.
Conversion Costs
A method used to separate mixed costs into their variable and fixed components, using the highest and lowest activity level.
High-Low method
Costs that were incurred in a previous process and brought into a later process as part of the product’s cost.
Transferred-in Cost
FORMULA: (4 variations of the equation)
Contribution Margin Ratio
= CM / T.R. = (TR - TVC) / TR = (P - V) / P = CM per unit / P
FORMULA: (both for units and dollars)
Sales req’d to earn desired profit
(Units) = (TFC + desired profit) / CM per unit
OR
(Dollars) = (TFC + desired profit) / CMR
FORMULA:
Variable cost per unit
= Chg in tot. cost / Chg in volume of activity
= (Hi cost - Lo cost) / (Highest volume - Lowest volume)
An accounting system that accumulates costs by job;
Used by companies that manufacture unique products or provide specialized services.
Job Order Costing System
A planning tool that expresses the relationships among costs, volume and prices and their effects on profits and losses.
Cost-Volume-Profit (CVP) Analysis
FORMULA:
Contribution Margin per unit
= Price - Volume
A budget prepared for only one level of sales volume.
static budget
FORMULA:
Margin of safety in units
= expected sales - breakeven sales
A cost that increases or decreases in total in direct proportion to increases or decreases in the volume of activity.
Variable Cost
FORMULA:
Margin of safety ratio
= margin of safety in units / expected sales in units
FORMULA:
Breakeven (units)
= TFC / CM per unit
A financial plan that managers use to coordinate a business’s activities.
Budget
Contribution Margin Ratio
The ratio of contribution margin to net sales revenue.
FORMULA:
Cost per EUP for transferred in
= Tot transferred in costs / Equivalent units of production for transferred in
The sales level at which operating income is zero;
Total revenue = Total cost
Breakeven
