Things to Know Flashcards
Prime costs and conversion costs
Product versus period costs
Behaviour of total and unit variable costs(Graph)
Behaviour of total and unit fixed costs
Nonlinear behaviour of variable and fixed costs(GRAPH)
Formula for variable cost per unit using the high-low method
Cost of goods manufactured formula
Total Manufacturing Cost= The sum of the direct materials costs, direct labour costs, and manufacturing overhead incurred in the current year
What is the Job cost sheet? And what is is made up of?
job cost sheet is a form that is used to record the costs that are chargeable to a specific job and to determine the total and unit costs of the completed job
Materials requisition slip+Time ticket+prederermined manufacturing overhead
Formula for predetermined overhead rate
Example:
Wallace Manufacturing uses direct labour cost as the activity base. Assuming that annual overhead costs are estimated to be $280,000 and that $350,000 of direct labour costs are anticipated for the year, the overhead rate is 80%, calculated as follows:
$280,000÷$350,000=80%
Actual costing system compared with normal costing system
The same but actual uses actual factory overhead rate while normal uses predetermined.
Under-applied and over-applied overhead
Cost of Goods Sold Method, when and what do you debit or credit in case of underapplied or overapplied?
underapplied overhead is debited to Cost of Goods Sold. Over-applied overhead is credited to Cost of Goods Sold.
Proration Method
The process of assigning under- and over-applied overhead costs to the inventory accounts Work in Process and Finished Goods, and to Cost of Goods Sold.
When do Companies use process cost systems
Companies use process cost systems to apply costs to similar products that are mass-produced in a continuous way.
a combination of a process cost and a job-order cost system?
Operations Costing
Equivalent units of production formula
+QUESTIONS
Example 1: In a specific period, the entire output of Cott Corporation’s blending department consists of an ending work in process of 4,000 units, which account for 60% of the materials, labour, and overhead. The equivalent units of production for the blending department are therefore…
Example 2: Cott’s packaging department’s output during the period consists of 10,000 units completed and transferred out, and 5,000 units in ending work in process that are 70% completed. The equivalent units of production are therefore…
Example 1: In a specific period, the entire output of Cott Corporation’s blending department consists of an ending work in process of 4,000 units, which account for 60% of the materials, labour, and overhead. The equivalent units of production for the blending department are therefore 2,400 units (4,000 × 60%).
Example 2: Cott’s packaging department’s output during the period consists of 10,000 units completed and transferred out, and 5,000 units in ending work in process that are 70% completed. The equivalent units of production are therefore 13,500 [10,000 + (5,000 × 70%)].
What are the steps in making The Production Cost Report
- Calculate the physical unit flow.
- Calculate the equivalent units of production.
- Calculate the unit production costs.
- Prepare a cost reconciliation schedule.
(step 1 of The Production Cost Report) Calculate the Physical Unit Flow.
what are the formulas for total units to be accounted for and total units acounted for?
Physical units are the actual units to be accounted for during a period, regardless of any work performed. To keep track of these units, it is necessary to add the units started (or transferred) into production during the period to the units in process at the beginning of the period. This amount is called the total units to be accounted for.
The total units are then accounted for by the output of the period. The output consists of units transferred out during the period and any units in process at the end of the period. This amount is called the total units accounted for.
The 4 steps of Activity-Based Costing
Step 1: Identify activity cost pools and assign cost to pools
Step 2: Identify cost drivers and total Usage
Step 3: Calculate activity-based overhead rate
Step 4: Allocate overhead costs to products based on use of cost driver
Formula for calculating activity-based overhead rate
What are the benefits of ABC?
- ABC employs more cost pools and therefore results in more accurate product costing.
- ABC leads to enhanced control over overhead costs.
- ABC supports better management decisions.
Classification of Activity Levels.
Unit Level Activities
Batch-Level Activities
Product-Level Activities
Facility-Level Activities
Value-added activities vs Non-value-added activities
Value-added activities are those activities of a company’s operations that increase the perceived value of a product or service to customers.
Non-value-added activities are those activities that, if eliminated, would not reduce the perceived value of a company’s product or service. These activities simply add cost to, or increase the time spent on, a product or service without increasing its perceived value.
contribution margin per unit
contribution margin ratio
contribution margin ratio
Profit equation
break-even point in units using contribution margin
break-even point in sales dollars
Formula for required sales in units with desired OI
operating income after taxes/operating income before taxes
Operating income after taxes = operating income before taxes × ( 1 − tax rate )
Operating income before taxes = operating income after taxes ÷ ( 1 − tax rate )
Formula for required sales in units with Desired OI
Formula for required sales in units using contribution margin per unit/required sales in dollars using contribution margin ratio
Formula for margin of safety in dollars/Formula for margin of safety ratio
Calculation of break-even sales in units
Weighted-average unit contribution margin
Break-even point in units
Calculation of weighted-average contribution margin
Calculation of break-even point in dollars
