ma part b Flashcards
Variable costing
adds together direct materials, direct labor, and variable overhead costs in product costs
absorption costing
adds together direct materials, direct labor, and both variable and fixed overhead costs in product costs
Required for external financial reporting under GAAP
Units produced exceed units sold
Production > sales
absorption costing > variable costing
Fixed OH is not in inventory for variable costing
Units produced are less than units sold
Production < sales
Absorption costing < variable costing
Difference from the fixed OH
equation for absorption costing i/s
sales revenue
- COGS (DM + DL + variable OH + fixed OH)
= gross profit
- non manufacturing costs (selling exp. + admin exp.)
= net income
equation for variable costing i/s
sales revenue
- variable costs (DM + DL + variable OH + variable s&a exp.)
= contribution margin
- fixed costs (fixed OH + fixed s&a exp.)
= net income
Make or buy
select the action with the lower cost
2 columns comparing costs
Sell or process
select the action with the higher income
2 columns measuring incremental rev, inc. costs, inc. income
scrap or rework
Decision rule: select the action with the higher income
2 columns finding the income for scrap and rework
Keep or drop
Decision rule: select the action with the higher income
special order
Decision rule: Accept the special offer if income increases (reject it if income decreases)
2 columns measuring incremental rev, inc. costs, inc. income
Master budge
a formal comprehensive plan that contains several interconnected budgets
starts with sales budget
Sales budget
budgeted unit sales
* budgeted sales price
= budgeted sales
production budget
budgeted unit sales
+ desired ending FG in units
= units to be available for sale
-beginning FG inventory in units
=budgeted total units needed to be produced
direct materials budget
budgeted total units needed to be produced
* budgeted requirements per unit
= materials needed for production
+ desired ending materials inventory
= total required materials
- beginning materials inventory
= materials needed to be purchased
* materials cost per measure
= budgeted total cost of direct material purchases
direct labor budget
budgeted production in units
* DL requirements per unit
= total DL hours needed for production
* wage rate (per DL hour)
= total cost of DL
factory overhead budget
budgeted production in units
* DL requirements per unit
= total DL hours needed for production
* variable OH rate
= budgeted variable OH
+ budgeted fixed OH
= budgeted total factory OH
cash budget
beginning cash balance
+ cash collections
- cash disbursements
= preliminary cash balance
+ / -: financing (for loan)
= ending cash balance
budgeted income statement
sales
- cogs
- s, g, a expenses
= operating profit
- interest expense
= income before income taxes
- income tax expense
= net income
Budgeted balance sheet
Budgeted amounts for assets, liabilities, and equity as of the end of the budget period
Prepared using information from other budgets
Fixed budgeting
static budget, based on one predicted amount of sales or other activity measure
Flexible budget
variable budget, based on more that one amount of sales or other activity measure
Standard costs
Preset costs for delivering a product or service under normal conditions
Cost variance
the difference between actual and standard cost
Actual quantity (AQ)
actual direct material or direct labor used to manufacture the actual quantity of output
Standard quantity (SQ)
the standard input expected for the actual quantity of output
Standard input * actual units output
Actual price (AP)
the actual amount paid to acquire the actual direct material or direct labor used for the period
standard price (SP)
standard price of direct material or direct labor
direct material variances
actual cost: AQ x AP
standard price: AQ x SP
standard cost: SQ x SP
price variance
quantity variance
dm cost variance
DM price variance
AQ x AP - AQ x SP
DM quantity variance
AQ x SP - SQ x SP
DM cost variance
AQ x AP - SQ x SP
direct labor variance
actual cost: AH x AR
standard price: AH x SR
standard cost: SH x SR
rate variance
efficency variance
DL cost variance
DL rate variance
AH x AR - AH x SR
DL efficiency variance
AH x SR - SH x SR
DL cost variance
AH x AR - SH x SR
variable OH variance
actual results: AH x AR
actual hours at standard rate: AH x SR
flexible budget: SH x SR
varOH spending variance
varOH efficiency variance
varOH cost variance
varOH spending variance
AH x AR - AH x SR
varOH efficiency variance
AH x SR - SH x SR
varOH cost variance
AH x AR - SH x SR
fixed OH variance
actual results: usually given
budgeted results: usually given
fixed OH applied: SH x SR
fixed OH spending variance
fixed OH volume variance
fixed OH cost variance
fixed OH spending variance
actual results - budgeted results
fixed OH volume variance
budgeted - SH x SR
fixed OH cost variance
actual results - SH x SR
sales variance
Budgeted: want to find the budgeted price * actual quantity
Actual: actual price * actual quantity
