Final Exam Flashcards
What are conversion costs? How do you calculate them?
- Costs incurred to convert materials and goods into the finished product
- Direct labor + manufacturing overhead
What are period costs?
All costs that are not product costs (selling and admin, salaries and commission, advertising)
How do you calculate the variable cost in the high-low method?
change in cost / change in activity
How do you calculate COGS from an income statement?
Beg Inv + purchases - End Inv
What is a direct cost?
A cost that can easily traced to a cost object
What costs are essential in decision making?
Differential costs, opportunity costs, and sunk costs
How do you calculate the predetermined overhead? rate?
Est. Manufacturing overhead / Est amount allocated
How do you calculate the overhead applied to a particular job?
predetermined overhead rate / amount allocation base incurred by job
What is cost of goods manufactured?
This is the amount transferred from work in process into finished goods
How do you calculate the cost per equivalent unit?
(cost of Beg WIP + costs added) / equivalent units of production
How do you calculate the break-even point in sales?
Fixed / CM Ratio
How do you calculate the break-even point in units?
Fixed / Unit Cm
How do you calculate the CM Ratio?
CM / Sales
How do you calculate the degree of operating leverage?
CM / Net Operating Income
What does the degree of operating leverage tell you?
The number computed is how many times the net operating income grows with an increase in sales.
How do you calculate the percentage change in net operating income?
Degree of Operating Leverage x percentage change in sales
How does variable costing account for fixed manufacturing overhead?
It doesn’t. Only direct materials, direct labor, and variable moh. Fixed moh is instead treated as a period cost.
How does absorption costing account for fixed manufacturing moh?
Fixed and all other costs are treated as product costs
How can you calculate the net operating income for each period under variable costing?
Number of units sold x CM per unit - fixed
How do you calculate ROI?
Net Operating Income / Average Operating Assets
or
Margin x Turnover
How do you calculate margin?
Net operating income / sales
How do you calculate turnover?
sales / avg operating assets
What is residual income? How is it calculated?
- Net operating income that an investment center earns above the minimum required return on operating assets
= income - (operating assets x minimum required return)
How do you calculate NPV?
present value - investment
or
investment + (inflow x decimal from table)
How do you calculate the profitability index?
NPV of project / investment required
How do you calculate the payback period?
investment / annual inflows
where investment consists of cost - salvage of old equip
where annual inflows consists of income + depreciation
How do you calculate the simple rate of return?
annual income / investment
How do you calculate the ending work in process inventory?
= direct materials + direct labor + applied moh
