Review Flashcards
Under applied manufacturing overhead
Excess of ACTUAL manufacturing overhead costs over applied manufacturing overhead costs
Over applied manufacturing overhead
Excess of APPLIED manufacturing overhead costs over actual manufacturing overhead costs
Cost of Goods Manufactured
Total manufacturing costs
+ Beginning Work-In-Progress
- Ending Work-In-Progress
Cost associated with units completed and transferred out during current production period
Cost of Goods Sold
Cost of Goods Manufactured
+ Beginning Finished Goods Inventory
- Ending Finished Goods Inventory
Equivalent Units of Production
Work required to COMPLETE units in beginning inventory
+ Number of units started and completed this period
+ Degree of completion of units in ending inventory
Total Manufacturing Costs
Cost of beginning WIP inventory
+ Costs added to production process this period
Process Costing
- Find Equivalent Units of Production done during the processing time period
- Calculate product cost per unit
total cost during period/work done
3.Calculate total cost of units completed and transferred out - Calculate total cost of units remaining at the end of production period (ending WIP inventory)
Formula:
Work done in CURRENT period on BEGINNING WIP inventory
Number of physical units x (1 - percent completed last period)
Formula:
Work done in CURRENT period on ENDING WIP inventory
Number of physical units x percent completed in current period
Conversion Costs
Represents all direct labor and manufacturing overhead input during the period
Formula:
Production Costs per Unit
Beginning WIP:
(Direct materials total cost/equivalent. units)
+ (Conversion total cost/equivalent units)
+ Current Period:
(Direct materials total cost/equivalent units)
+ (Conversion cost/equivalent units)
= Total Dollars In
Formula:
Cost Transferred Out
Beginning WIP:
Initial direct materials
+ Initial conversion costs
+ (Cost to complete materials per unit x equivalent unit)
+ (Cost to complete conversion x equivalent units)
+ (Started and completed cost per unit x equiv. units)
= Total Cost Transferred Out
Formula:
Cost of Ending WIP
(Cost per unit for direct materials x equivalent units)
+ (conversion cost per unit x equivalent units)
Which Cost Allocation Method to Use
Traditional- products are the same or processes are very similar
Activity-Based Costing- nature of production process differs substantially across products
Formula:
Activity Rate
Cost pool total/number of cost driver events
Variable Costs
Remain the same per unit
Increase with number of units
Fixed Costs
Remain constant in total
Decrease with number of units
Formula:
Contribution Margin
Sales price - costs
or
current sales - break even sales
Formula:
Break Even Point
Fixed costs/contribution margin
or
Fixed costs/(sales price - costs)
Formula:
Profit
Sales revenue - Variable costs - Fixed costs or (Sales price x units) - (Variable costs x units) - Fixed costs or Sales revenue - (Contribution margin ratio x sales revenue) - Fixed costs
Formula:
Contribution Margin Ratio
Contribution margin/net sales revenue
Formula:
Solve for Break Even/Target Income
Sales revenue
- Variable costs
- Fixed costs
= 0/Target Income
Formula:
Variable Costs
Variable cost per unit x number of units
or
Variable cost ratio x sales revenue
Formula:
Variable Costs Ratio
Variable cost/net sales
Formula:
Sales Mix
(Fixed costs + Target Income)/Variable cost ratio
=Needed sales
Formula:
Determine Sales Volume to Achieve Target Income
(Sales price x units)
- (variable cost x units)
- fixed costs
= Target Income
Formula:
Return on Sales Revenue
Sales revenue - Variable costs - Fixed costs = percentage x sales revenue or Net income/total sales revenue
Formula:
Break Even Sales in Units
Total fixed costs/
(sales price per unit - variable cost per unit)
= Break Even Sales in Units
Formula:
Break Even/Target Income Volume in Units
(Fixed costs + Target Income)/Contribution Margin
Formula:
Break Even/Target Income In Dollar Amount
Sales revenue
- (Variable cost ratio x sales)
- Fixed costs
= Profit
Formula:
Degree of Operating Leverage
Contribution margin/ operating income
Operating Leverage
Higher the proportion of fixed cost to variable costs, the faster income increases or decreases with changes in sales volume
high degree = relatively large fixed costs = small changes big impact
Formula:
Operating Income Change
percent x operating leverage
Margin of Safety
High margin indicates good cushion; low margin indicates close to break even
only valid on current level of sales
Formula:
Margin of Safety
In Units:
Current sales in units - break even sales in units
In Dollars
Current sales- Break even sales
In Percentage
(Current sales - break even sales)/current sales
In Clients
(Current sales - break even sales)/cost per client
Establishing a Standard Cost System
- Develop standard costs
- Collect actual costs
- Compare and identify variances
- Journalize actual and standard costs and record variances
- Report results
- Analyze causes of significant controllable variances
- Take action to eliminate variance or revise standard cost
Formula:
Materials Price Variance
(Standard material price - actual material price)
x quantity purchased or used
Formula:
Material Quantity Variance
(Standard quantity allowed - actual quantity used)
x standard price
Formula:
Standard Quantity Allowed
Standard quantity per unit x actual units produced
Formula:
Labor Rate Variances
(Standard rate - actual rate)
x quantity of labor used/actual hours
(AR-SR)(AH)
Formula:
Materials Rate Variance
(Standard rate - actual rate)
x quantity used/purchased
Formula:
Variable Overhead Spending Variance
(Actual rate x standard rate of overhead)
- actual amount spent on variable overhead
Formula:
Labor Efficiency Variance
(Standard quantity hour - actual quantity hours)
x standard rate
(SH-AH)(SR)
Formula:
Materials Efficiency Variance
(Standard quantity x actual quantity)
x standard rate
Formula:
Variable Overhead Efficiency Variance
(Standard hours allowed for actual output - actual hours)
x standard rate
Variance Journal Entry
Work in Progress Inventory (SHxSR)
Wages Payable (AHxAR)
Labor Rate VAriance (AR-SR)(AH)
Labor Efficiency Rate (SH-AH)(SR)
unfavorable ~ expense = DEBIT
favorable ~ revenue = CREDIT
Current Operations Budget
Needs of prior budget
+ ending inventory
- beginning inventory
Production Budget
Sales budget
+ ending finished goods inventory
- beginning finished goods inventory
Direct Materials Production Budget
Production budget x direct material per unit
Direct Materials Purchases Budget
Direct materials production budget
+ ending direct materials inventory
- beginning direct materials inventory
Differential Costs
- Variable cost
- Direct fixed cost
- Opportunity cost
Joint Product Cost
Joint costs are IRRELEVANT to ADDITIONAL PROCESSING decision pre split off point.
Joint costs are RELEVANT to the decision to INITIALLY PRODUCE AN ARRAY of joint products
