Midterm #1 Flashcards
What is the CVP Equation
Qsld * (sale price/unit - VC/unit) - Fixed costs = operating income
What is the purpose of CVP
decision making
What is the difference between the contribtution margin and gross margin
Gross margin includes fixed costs and no variable period costs, and contribution margin doesn’t include fixed and does include variable period costs.
What is the contribution margin income statement?
Sales
- Variable Costs
= Contribution Margin
- Fixed
= Operating Income
How do you calculate FPDOH
product fixed costs/ total estimated allocation base
Why do we have a PDOH
- Cost is COMMON
- INDIRECT
- We make BOY estimates for customers
- Avoid seasonal fluxations
Why do we have FOH and VOH rates?
because the costs are common and indirect to both products
Why do we credit MOH
we apply it on a monthly basis to avoid under costing our products and leading to skewed GM’s
Why do we debit MOH
to avoid seasonal fluxuations
When do we want to use job costing
unique manufactured items that are not continuously produced.
When is ABC used?
- When you have multiple products
- OH is a large chunk of cost/unit
- The indirect costs are on a unit or batch level ( more units produced more costs)
what are the benefits of ABC
more accurate indirect cost/unit
when is it called a cost driver
when the costs are variable
when is it called allocation base
when the costs are fixed
What makes for a good cost driver/allocation base?
it should be common to the cost object
should be measurable at the individual product line bases
must have a good cause effect
what are batch level OH costs
costs the increase on a per batch basis
- like grease
what are unit level OH costs
utilites -> increase as you make more units
what are facility level cost
rent on the manufacturing facility
what is a top-down information flow approach
CEO tells how many to sell
- has better incentives, can make employees work harder to reach goals, but can also make employees quit more
what are “homogeneous” and “like-minded” indirect costs in terms of ABC
example utilities and grease
what is bottom-down information flow approach
CEO asks how many they think workers will be able to make
- has better information
when is the DMPPV calculated? and how is it calculated?
any time RM are purchased
(actual price per unit vs budeted X how many units were bought)
How often is the DMEV calculated? and how is it calc?
every time the material is requisitioned out of RM and into WIP/FG (probably daily)
amount of fabric budgeted to make the suits vs how much was actually used X the rate
how often is the DLEV calculated? and how is it calculated
calculated daily but journalized every pay period
take budgeted labor for the amount of suits made vs. actual worked X rate
