Week 1 Slides (Review COMM305) Flashcards
Direct Materials Costs
Acquisition costs of all materials that become part of the cost object and can be traced to the cost object in an economically feasible way
Example: raw materials, parts, freight-in, sales taxes, customs duties
Direct Manufacturing Labour Costs
Compensation of manufacturing labour that can be traced to a cost object in an economically feasible way
Example: wages of assembly line workers
Indirect Manufacturing Costs
Manufacturing costs related to the cost object that cannot be traced to the cost object in an economically feasible way
Allocated to cost objects
Example: depreciation, maintenance supplies, supervisor’s salaries
Also referred to as manufacturing overhead costs or factory overhead costs
Prime Costs
Direct Manufacturing Costs; DM + DL
Conversion Costs
All costs except DM; DL + MOH
Variable Costs
Change in total in proportion to changes in output within a relevant range (cost per unit is constant)
Constant on a per unit basis
Fixed Costs
Constant in total within a relevant range of output
Change on a per unit basis as level of activity or volume changes
Period Costs
Little evidence of future economic benefit (not considered an asset), therefore expensed in the period incurred
Are all the costs on the Statement of Comprehensive Income other than cost of goods sold
Product Costs / Inventoriable Costs
All costs of a product that are considered an asset when they are incurred
Become cost of goods sold on the Statement of Comprehensive Income when the product is sold
Operating Income Formula
Revenue - Variable - Fixed Costs = Operating Income
Contribution Margin Definition and Formula (Total + Per Unit)
Amount remaining from revenue obtained after all variable costs have been paid
CM = Total revenues – Total variable costs
CM per unit (CMu) = unit sales price − unit variable cost
Contribution Margin Percentage (Ratio) Definition + Formula
Equals unit contribution margin per unit divided by unit sales price
CM Ratio = CMu ÷ SPu
Breakeven Point Conditions and Formula
Total Revenue=Total Cost
Contribution Margin=Fixed cost
BEP (units): Fixed Costs / CMu
BEP (Sales Rev.): Fixed Costs / CM Ratio
Breakeven Revenue / volume
Where total revenue = total cost
Total revenue referred to as breakeven revenue
Number of units sold referred to as breakeven volume
